Despite a weak market sentiment and a decline in trading volume following the approval of an Exchange-Traded Fund (ETF), Bitcoin still garners interest among buyers below the $43,000 mark. There is anticipation that an upcoming pivotal event could significantly influence the cryptocurrency markets soon.
Bank Turmoil and Bitcoin’s Reaction
Last year, the first quarter saw the collapse of several regional banks due to inadequate risk adjustments amidst rapid interest rate hikes by the Federal Reserve. The crisis seemed to subside with the Fed’s market liquidity injections and the sale of the faltering banks. Yet, the failure of banks, including the crypto-oriented Signature Bank, and the nearly 60% drop in shares of another bank in 2024, raise concerns over the potential recurrence of similar incidents.
Current Bank Woes and Cryptocurrency Impact
As the market approaches the one-year mark since the initial disturbances, New York Community Bancorp’s (NYCB) shares have plummeted 30% within five days, echoing fears of a repeat of last year’s banking troubles. Cryptoverse CEO Benjamin Cowen has highlighted the bank’s fall to its 1997 valuation as a sign of investor vulnerability. Bitcoin’s price saw significant swings in March 2023 as a result of the regional bank failures, with the Federal Reserve’s Bank Term Funding Program offering temporary relief. Former BitMEX CEO Arthur Hayes has pointed out the volatility risks that could arise from the program’s discontinuation, suggesting a potential sharp recovery for Bitcoin if the scenario plays out similarly.
Amid these banking challenges, NYCB faced another credit downgrade from Moody’s, while China’s CSI 1000 index also took a trillion-dollar hit. These macroeconomic shifts hint at the possibility of extreme Bitcoin price volatility in the near future, with current discussions potentially materializing in the coming months.