Ethereum Jumps and Bitcoin Flattens: Is the Banking Crisis Over?

Ethereum suddenly made a jump as bitcoin remains somewhat flat at $28,000 in an unusual move following weeks of bitcoin’s leadership.

The world’s second largest cryptocurrency rose from $1,760 to $1,820 while bitcoin remained flat, so it’s not clear if there was a specific event.

However, it could just be the ratio. Ethereum’s value against bitcoin has fallen since March 12, when the banking crisis began.

It dropped from 0.072 bitcoin per Ethereum to 0.062, or about $280, rising to 0.064 today as the ratio may begin to recover.

This indicates that bitcoin has so far been the most important asset for investors or speculators running out of banking services, in part because it is the most integrated cryptocurrency in the financial system.

Whether this Ethereum bounce suggests that the bank flight has slowed is unclear, especially as there are some indications of better market sentiment.

First Republic Bank, which had $212 billion in total assets last year, saw its share price drop 50% in a spectacular slump Monday.

It rose about 15% today, partly because Treasury Secretary Janet Yellen is expected to suggest in a speech that the government can effectively support all banks with a potential for systemic contagion.

Bank crisis over?

The First Republic made $1.5 billion in net revenue last year and taxpayers haven’t seen a penny of it, but their bets and losses on municipal bonds, which are loans to city councils or the state government, may need to be covered by the taxpayer.

JP Morgan is also rumored to be providing advice to First Republic in assessing whether the bank can be sold or whether it can raise capital.

Credit Suisse also saw its shares fall 50% from UBS’s pre-acquisition price, wiping out approximately $17 billion held by a specific class of bondholders, those who invested in additional tier 1 bank debt (AT1) .

These are complex instruments that essentially amount to loans to banks to strengthen their capital ratio.

There is no default on these bonds as they convert to equity when the equity ratio typically reaches 5.125% or 7%, or are written off depending on the terms of the bond. Making them risky securities that provide higher returns.

In this case, they were eliminated, but bondholders complain that shareholders – technically the owners of the banks – got about $3 billion when they, as creditors, got nothing.

The media and some central banks, such as the ECB and the Bank of England, appear to be supportive of these bondholders, but on the surface it seems that their role was to get Credit Suisse into exactly the same situation.

In addition, the total market for these AT1 bonds is only $250 billion, so instead of a big story, as some suggested at the outset, this could become a footnote.

This might suggest that the crisis is over for now, as no new names have been added to the list for a while and the government hasn’t bankrupted any of them in terms of depositors.

Hopefully, there should be some discussion about how taxpayers in good times can also take a share of the profits to cushion these banks in troubled waters, but as far as bitcoin is concerned, the slowdown in this story of bank collapses could also mean a recession.

Ethereum is thus given some room to rise, which makes its peak remarkable, but of course there is also another interpretation that is complementary or alternative.

Because that $28,000 is clearly a resistance line as it faces the $30,000 number. Bitcoin caught and held, but a bit of relaxation here to see if it’s all real is what you’d expect.

Since bitcoin has risen so much higher than other cryptos because it got all the attention, investors and traders will naturally look and analyze the ratio differences and see that perhaps Ethereum’s ratio has fallen a little too much.

And then they buy to balance, and we get a spike to bring our little Ethy to the table because the boy is so quiet.

We call it ping pong, this back and forth between bitcoin and eth, but whether this is the start of the eth show or just a cat’s jump may very well depend on whether these bank runs are really over.