Bitcoin and other cryptocurrencies saw a dip in their value on Monday as investors speculated that the recent takeover of First Republic Bank could potentially put an end to the financial crisis, which has been a driving force behind this year’s bitcoin rally. Coin Metrics reported that Bitcoin fell about 4.2% to 28,137.76 to start the week and Ether lost 4% to 1,828.81.
On Monday, regulators took control of First Republic Bank, making it the third U.S. bank failure this year and the biggest one since the 2008 financial crisis. JPMorgan Chase will acquire most of its deposits and assets. Last week, the price of bitcoin rallied in the final week of April as troubles at the bank unfolded. However, trading of the cryptocurrency has been choppy as investors balance the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession, and an increasingly bearish narrative building around the U.S. dollar.
While investors have been expecting a slowdown from bitcoin’s first-quarter rally, cryptocurrency remains on its upward trend and has gained about 70% for the year after finishing down more than 60%. Alex Thorn, head of firmwide research at Galaxy, said, “It’s unclear whether the banking crisis narrative can continue to be a boon for bitcoin. Overall, the market lacks clear positive near-term catalysts, with supply issues overhanging bitcoin. That being said, bitcoin accumulation by small addresses is outpacing issuance, and we expect Ethereum staking to increase, each of which provides a supportive supply narrative.”
Thorn added, “Outside of crypto-native factors, we expect a back-of-the-year macro environment to be characterized by tightening, recession, and an expanding multipolarity in the global economy, all of which can be supportive of gold and bitcoin.”
