The turmoil in the banking sector shows no signs of abating as another major bank faces mounting challenges. With deposit levels dropping rapidly and regulators expected to step in, the situation has only intensified in recent days.
Bitcoin’s price seemingly benefits from First Republic Bank’s trouble, but the pop could be short lived.
According to on-chain data, the flagship cryptocurrency surpassed $29,000, but quickly retreated, then rallied back. The rally followed the recent news about First Republic Bank’s potential trouble.
Safe Haven Asset Or No?
Yesterday news broke on the massive withdrawal from the First Republic Bank. The bank’s customers reportedly withdrew $100 billion following the recent banking crisis in the US.
Alternatively, the bank’s stock has been nosedive since the beginning of the year, dropping by 97%.
The Dow Jones fell by over 200 points as investors’ attention was divided between the excitement over the earnings results of big technology companies and concerns surrounding First Republic Bank.
The bank recently announced a 41% deposit drop for the first quarter. At the end of Q4 2022, deposits reportedly totaled $176 billion. However, as of March, deposits plummeted to $104 billion, indicating a significant loss of confidence from the bank’s customers.
First Republic Bank said it was considering ‘strategic options.’ However, no viable solution was underway, according to a source familiar with the matter. The source also noted that First Republic Bank is contacting US authorities.
Not The Last Dead Bank
The recent troubles at First Republic Bank have sent shockwaves through the financial world, prompting widespread concern among investors and analysts alike. The bank’s fate has become the subject of intense speculation, particularly in the wake of the crashes of three other US banks in March.
Many people feared that it would be the next bank to fail, but its survival was secured thanks to the urgent intervention of US authorities and the support of 11 major banks.
On March 16, these banks deposited a staggering $30 billion into First Republic to prevent a bank run. Despite this, there are still concerns that regulators may seize the bank in the future, as reported by FOX.
In recent weeks, rumors have circulated about First Republic’s attempts to sell part of the bank to raise capital and shore up its financial position.
However, potential partners have been hesitant to get involved due to the high level of risk involved in taking on a troubled bank. This has left First Republic in a precarious position, with few options available.
Wider Economic Weakness
With many businesses struggling to stay afloat and the economy in turmoil, banks face increasing pressure to maintain financial stability and avoid becoming the following broken link.
As regulators and industry experts grapple with these issues, what the future holds for banks like First Republic and the broader financial system remains to be seen.
Despite assurances from authorities that the banking system remains strong, analysts remain skeptical and worry about the potential long-term implications. As the crisis deepens, it remains to be seen how much more upheaval the financial industry will face in the coming weeks and months.
Briefly, after news broke out, Bitcoin surged over $29,000. At the press time, the largest cryptocurrency trades at $28,800 after dropping below $27,500. The crypto market is highly volatile, with other top coins having experienced the plunge.
The recent banking crisis events led by SVB have caused widespread panic and uncertainty among investors about the stability of the traditional financial system. This has prompted many to seek alternative investment forms, such as cryptocurrencies like Bitcoin.
Bitcoin’s year-to-date performance sees 70% growth in value. Bitcoin’s recent surge in value is a testament to its growing popularity as an alternative to the traditional banking system.
Many are bullish on the future of cryptocurrencies, predicting Bitcoin could break through $100,000.
On the other hand, the regulatory landscape is not favorable. Cryptocurrency’s reputation for being associated with illegal activities, such as money laundering and terrorism financing, turns it into a wild west under strict scrutiny.
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