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It’s a nice snub to traditional finance. While the American banking system is shaking following the bankruptcy of Silicon Valley Bank and several regional establishments, raising fears of global contagion, cryptocurrencies are doing best. Bitcoin has seen its value increase by nearly 25% in the past 36 hours.
Has bitcoin become a safe haven in the same way as gold, which has also risen sharply in recent days? We can think so, in view of the spectacular rise in the price of the bitcoin and cryptocurrency usually the last few days. Ironically, this abrupt resurrection is a small reminder of what bitcoin is fundamentally.
Born after the financial crisis of 2008, in reaction to the excesses of traditional finance, it is intended to be the manifesto of those who do not believe in the regulated finance of central banks. The 2008 crisis has, in fact, highlighted the inability of the FED, the American Federal Reserve, to prevent the crisis of subprime and the excesses of Wall Street. It took the intervention of President Obama for stricter control measures to be adopted. But subsequently, in some states such as California, bankers lobbied intensely to get the Trump administration to ease these financial constraints. Among these bankers, there was Greg Becker, the boss of the SVB, at the origin of the current crisis. He is now a watered sprinkler on American social networks.
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Today, while Wall Street is shaking on its foundations, bitcoin is once again attracting the attention of those who advocate decentralized finance, that is to say a finance freed from the weight of central banks in favor of a control by cryptocurrency holders.
The rise in interest rates is receding
But the resurrection of the bitcoin is not only explained by the mistrust of a part of America towards the banks. Several cyclical factors contribute to the increase. First of all, the fact that the American authorities quickly guaranteed the deposits of certain banks in difficulty relieved the markets. This guarantee, for example, saved Signature Bank customers, many of whom were players in the cryptocurrency ecosystem.
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But above all, the main factor explaining the rise of bitcoin is the conviction that in the face of the crisis, the American Federal Reserve has no other choice but to pause its policy of raising interest rates. Indeed, for nearly a year, in order to curb inflation, the FED has gradually raised its rates – today situated in a range between 4.25% and 4.5% – which makes cryptocurrencies less attractive with regard to the yields offered by Treasury bonds, for example.
This prudent policy is also largely at the origin of the current difficulties of regional banks such as the SVB, which were saving in government bonds. With a brutal continuation of this policy of high rates now ruled out, investors are once again interested in the returns offered by cryptocurrencies.
Flash in the pan or sustainable rise?
However, this upward movement is still far from guaranteed over time, as cryptocurrencies are used to extreme volatility. Before this banking crisis, US regulators were in the process of putting in place tougher regulations for the cryptocurrency ecosystem after numerous abuses that ruined thousands of savers. It is a safe bet, while the monetary authorities are already talking about a strong comeback of controls on the quality and viability of banks, that they are continuing to implement regulation of the cryptocurrency universe. . And this could come to stop the current upward movement.
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