Bitcoin adoption may benefit from the current instability in the US banking system and lead to a potential increase in the asset’s price, according to analysts at Bernstein Private Wealth Manager. They advise people to invest in BTC as the traditional finance industry experiences a crisis that might result in a new bull run for the cryptocurrency.
Weak Banks and BTC
Gautam Chhugani and Manas Agrawal, analysts at Bernstein, think the banking crisis in the US could worsen and cause investors to turn their back on traditional finance. They suggest bitcoin might save the day by becoming a popular alternative, resulting in mainstream adoption and a new bull run. The analysts believe that the widening gap between Treasury rates and bank deposit rates could continue to weaken banks’ balance sheets leading to more investors migrating to money markets.
“The safe haven signal will lead to a new crypto cycle, pushing digital wallets as on-chain savings accounts. The gap between Treasury rates and bank deposit rates will continue to hollow out banks, with weak balance sheets leading to another round of mass migration to money markets.”
Earlier this year, the US authorities shut down Silvergate Capital, Signature Bank, and Silicon Valley Bank (SVB) citing severe liquidity issues. More recently, First Republic Bank – one of the top 20 largest financial institutions in the US – saw its shares drop by 55% on a weekly basis after disclosing disappointing Q1 earnings. The situation has raised concerns about possible contagion in the sector.
Bernstein’s analysts also expect that the Federal Reserve will start another round of money printing to solve banking problems. They advise investors to buy bitcoin, as this might solidify the cryptocurrency’s position as digital gold.
“To rescue the ship, the Fed will have to resort to dollar debasement and monetary printing again, bringing back the role of Bitcoin as digital gold.”
BTC’s Resilience Amid the Turbulence
Despite the initial shock, the primary cryptocurrency’s price has soared substantially during the recent banking crisis. The price hit $28,500 a few days after SVB’s collapse and continued to rise in the following month. Bitcoin seems to do well when traditional finance experiences significant issues. After all, it was created during the last major financial crisis in 2008 caused by failing banks.