- Bitcoin price at the time of writing was trading above $28,200 after facing a 10% crash this week.
- First Republic Bank plunged by nearly 50%, taking down the stock market with it.
- The prospect of the US government seizing the bank arose should it exhaust private sector solutions, as per a Fox reporter.
Bitcoin price detached from the stock markets and rallied towards the end of Q1 following the recent banking crisis. Now the odds of a similar occurrence are making rounds thanks to the First Republic Bank’s decline and how it could potentially trigger another crisis.
Bitcoin price on the rise as fear of banking crisis loom
Bitcoin price benefitted from the First Republic Bank’s fall as the bank’s stock, FRC, crashed by nearly 50% over the last 24 hours bringing its total downfall since the beginning of March to 93.32%. At the time of closing, FRC was trading at $8.10.
FRC/USD 1-day chart
One of the biggest reasons that caused the crash was reports of the bank facing $100 billion worth of deposit exodus. As per the announcement on Monday, the falling inflows took everyone by surprise as its deposits shrank by 40% in the first quarter of this year.
To further worsen the situation, reports of the United States government seizing the bank have been making rounds. As per a tweet by Fox reporter Charles Gasparino, bankers working with First Republic Bank are expecting an eventual government receivership for the ailing bank.
However, this would come only after it exhausts all private sector solutions, such as asset sales and finding a buyer, which appears difficult. He further added,
“Officials at the big banks believed the Feds were poised last week to take over FRC just before its earnings announcement crushed shares.
While most of the other US bank stocks are holding strong at the moment, market participants have already begun gauging the possibility of another banking crisis. This is reflected in the forecast of the next Fed rate hike scheduled for the upcoming week. The probability of a 25 basis points (bps) increase fell from 90.5% to 76.6% in the span of 24 hours.
Fed Interest Rate hike probability
Interestingly, the US dollar index bore no negative impact from the bank’s stock crashing, which is a good sign considering the fading faith in the currency. However, the stock market certainly took a hit as S&P 500 index fell by 1.5%, followed by Nasdaq plunging by nearly 2%.
The direct positive impact of these developments, although, was felt by Bitcoin price, which shot up by nearly 2.77% to trade at $28,378 at the time of writing. After the 10% crash observed from April 19 to April 21, investors were expecting a longer delay before recovery could begin. But the First Republic Bank crash reignited Bitcoin’s “safe haven” narrative, resulting in the sudden upsurge in price.
BTC/USD 1-day chart
However, the rest of the crypto market is not observing any significant increase, suggesting the likelihood of the alt season is diminishing. Bitcoin’s dominance following the price rise increased by 0.7% to 47.73%, marking a 10-day high.
To understand more about the reduced likeliness of an alt season, read here - Institutions reviving Bitcoin spot ETF bid might lead to a pushback in the alt season
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