Cryptocurrencies are making a striking recovery in the midst of the US banking system’s recent turmoil. With four banks collapsing this year, investors are concerned, but cryptocurrencies are proving to be a secure and viable investment.
Bitcoin is up 62.7% year to date, and the S&P Cryptocurrency Broad Digital Market Index is up 50.6%. This regional banking crisis is causing investors to flock to blockchain-based assets for liquidity and security, and some institutional investors are touting Bitcoin as a safe-haven asset.
The first banking crisis of the social media era has caused panic and misinformation to spread rapidly, leading to the collapse of Silicon Valley Bank, the 16th-largest bank in the US. However, the crisis has also driven cryptocurrencies to gain momentum, with investors turning to decentralized cryptocurrencies as a hedge against the current banking system and government regulations.
The Federal Reserve’s hawkish stance and consecutive rate hikes were a major factor in the downfall of cryptocurrencies last year, with Bitcoin plummeting by more than 60%. However, the Fed has begun to taper its rate hikes in the wake of financial contagion, making decentralized currencies more attractive to investors.
The current uptrend in cryptocurrency may be a bull trap, but the tumultuous macroeconomic backdrop is expected to continue making decentralized currencies more attractive to investors. This makes it a great time to invest in cryptocurrencies, even as the market shows signs of a potential bubble.