Bitcoin surge following the fall of another American bank’s stock; Are conditions in favor of digital currencies?

Following a 50% drop in the value of First Republic Bank and creating a wave of fear about the imminent bankruptcy of another bank, the price of Bitcoin saw a 3.7% growth in the past 24 hours.

According to Cointelegraph, the head of research at Australian digital currency education platform Collective Shift believes that the price of Bitcoin rose shortly after Fox News Business reporter Charles Gasperino said that bankers working with First Republic Bank expect That this institution be under the management of a government settlement institution.

Account liquidation is a method that provides the possibility of repaying creditors’ debts in the event of possible default and helps companies in crisis avoid bankruptcy.

Data from sentiment analysis firm Suchan suggests that the correlation between Bitcoin and the S&P 500 is likely to decline as the view that “Bitcoin is a safe-haven asset amid a banking crisis” is spreading again.

First Republic Bank’s problems in early March led to the deposit of $30 billion by 11 US banking giants, including JP Morgan and Bank of America.

Bloomberg reported on March 26 (6 April) that US authorities are seeking an emergency loan facility to help the bank overcome structural challenges on its balance sheet.

According to anonymous sources, despite First Republic Bank’s concern about its liquidity reserves, the American authorities announced at that time that the bank’s deposits are stabilizing and that the bank is not in danger of bankruptcy; An event that led to the closure of Silicon Valley Bank by regulatory bodies.

But unfortunately, these reassurances turned out to be false.

The publication of First Republic Bank’s quarterly earnings report on Monday, April 23 (3 May) showed that the total value of the bank’s deposits has decreased by more than 100 billion dollars, and First Republic is looking for various strategic options to strengthen its financial position as quickly as possible.

While the bank has yet to specify exactly what those strategic options are, its earnings report indicated that the company plans to trim its balance sheet by cutting executive pay, reducing office rent and laying off 20-25% of its workforce in the second quarter of 2023. small and reduce costs.

This year’s banking crisis has taken a heavy toll on financial institutions in the United States. Silvergate Bank announced on March 8 (March 17) that it will be closed after an influx of customers to withdraw their deposits.

Two days after the incident, the Silicon Valley investment bank was shut down by the California Department of Financial Protection.

Janet Yellen, the Secretary of the Treasury of the United States, despite the recent crises, once again emphasized that the American banking sector is strong and stable. Yellen said at the meeting of the Financial Stability Oversight Council on April 21:

Our banking system remains stable despite high capital and liquidity.