After losing 11% of its value last week, Bitcoin started a recovery and is trading at a high of 9.5% this Wednesday (26) after finding support at the 50-day moving average.
Trading at $29,900 at the time of writing, other factors that could contribute to Bitcoin’s rise include fears of a US recession and the ongoing banking crisis.
Capital flight from smaller cryptocurrencies has also been touted as another catalyst for this Bitcoin rally.
Bank shares of First Republic continue to fall
The first correlation to Bitcoin’s rise is related to yet another fall in shares of US bank First Republic. On Tuesday (25), shares fell 40%.
“First Republic $FRC. It lost another 40% today and is now -93% year-to-date.”
First Republic $FRC 😵💫
*Another* 40% down today and now -93% YTD. pic.twitter.com/SxJPjTz7m2
— TradingView (@tradingview) April 25, 2023
On the other hand, Bitcoin found support from the 50-day moving average on both Tuesday and Wednesday, serving as a springboard to boost the asset.
Returning to the First Republic, some analysts believe the crisis will prompt the US government to inject more money to continue bailing out the industry. That is, Bitcoin’s high may be an anticipation of this possible scenario.
Contraction of the dollar monetary base is worrying the market
Nicholas Gerli, founder and CEO of Reventure, presented worrying data on the US economy. Gerli points to a contraction in the monetary base, claiming that this has not happened in 90 years and that when it did happen it was related to crises.
“The only other times this happened was during the depression/great banking crisis”noticed. “All previous situations had an unemployment rate of 10%. And massive bank failures.”
Then, using the example of the First Republic, the executive explains what this means in practice. While the bank had a 36% drop in deposits compared to last year, its lending grew by 23% over the same period. “This is unsustainable”he concluded.
“What is so problematic about this contraction in the money supply is that inflation is still a problem”continued Nick Gerli. “So companies will have less access to capital at a time when they need it most to pay expenses and expand labor costs.”
“What happens to all the companies/companies with leverage when the money supply shrinks? Big layoffs. And major shutdowns.”
In conclusion, Gerli argues that the Fed could cut interest rates sooner than expected, saving the economy. In any scenario, inflation or recession, Bitcoin can benefit.
In a panic, everyone runs to Bitcoin
Finally, analytics firm Santiment brought a different take on Bitcoin’s recent rally. All in all, crypto investors flocked to a more reliable asset after last week’s market crash.
“With Bitcoin Remaining Relatively Stable While Altcoins Tumble, the Percentage of Threads Revolving around BTC Remains Well Above Average”wrote Santiment on Twitter. “Bitcoin’s high social dominance usually occurs during market euphoria or (in this case) fear.”
“Prices can recover quickly.”
🫣 Met #Bitcoin remains relatively flat while #altcoins fall, the percentage of discussions that matter $BTC remain well above average. In general, high social dominance for Bitcoin occurs during market euphoria or (in this case) fear. Prices can recover quickly pic.twitter.com/6Ewub6en1h
—Santiment (@santimentfeed) April 25, 2023
Ultimately, these reasons together help explain Bitcoin’s recovery. With only four days left in April, BTC needs to break above $28,500 to close out its fourth consecutive month of gains in 2023.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
