Bitcoin rebounds as concerns about US banking crisis resurface

As investors worry about the deepening of the US banking crisis, Bitcoin led the crypto market to rebound strongly. According to Bitpush terminal data, Bitcoin broke the five-day downward trend, breaking through $29,000 and once touched $30,000 during the session. Ethereum, the second largest cryptocurrency by market value , rose 4.5%, ADA rose nearly 9%, and BNB rose 3.5%.

According to Coinglass data, crypto short traders were liquidated, with short liquidations reaching $62 million in the past 24 hours. Most of the short orders came from Binance and OKX platforms, with each trading more than $17 million.

Bitcoin benefits from banking woes

Earlier on Wednesday, First Republic Bank revealed that deposits fell 41% to $104.5 billion in the first quarter, with net deposit outflows far exceeding market expectations. CNBC cited sources as saying that the U.S. government is currently unwilling to intervene in the rescue process of First Republic Bank. First Republic shares hit a record low that day and were suspended several times due to excessive volatility. The bank is reportedly making a last-ditch effort to find more cash. However, whether these measures will be enough to restore investor confidence and ensure the bank's long-term viability remains to be seen.

Recent bank failures have highlighted the potential risks associated with traditional banking and finance, leading investors to question the stability of the traditional financial system and seek alternatives. Bitcoin bulls have gained momentum from the woes of the U.S. banking industry, with Bitcoin rising more than 27% in a week in March when the U.S. banking crisis initially broke out.

Arthur Hayes, former CEO of cryptocurrency derivatives exchange BitMEX , expressed his opinion on this. He believes that if the U.S. government refuses to rescue First Republic Bank, it may trigger a dangerous chain reaction of bankruptcies.

He said in a tweet: "But if First Republic Bank fails and depositors leave. Then all other banks with the same problem will fail soon. The entire US banking system faces the same problem. Although everyone hopes that Yellen will rescue every bank that fails, it is not certain. This is a political decision. Maybe a bank is not highly regarded by politicians and is allowed to fail."

Hayes said both Bitcoin and gold have benefited primarily from the lack of clarity surrounding the fate of banks and lawmakers’ next moves, saying: “This uncertainty is what’s driving external funds like gold and Bitcoin higher.”

According to crypto data provider Kaiko , Bitcoin’s 30-day rolling correlation with gold has been climbing since March and is currently at 57%, the highest level in nearly two years. Its correlation with the S&P 500 fell further in April to just 7%.

BitPush previously reported that a report released this week by Standard Chartered Bank analysts stated that banking problems in the United States were the catalyst for Bitcoin's last rebound and return to the core use cases of cryptocurrencies.

Bernstein analysts said that Bitcoin has re-emerged as a "safe haven asset" amid recent banking problems. "As the second-order effects of deposit runs (credit freezes, margin pressures, asset quality issues) continue, we expect cracks to begin to appear in the banking industry, prompting the Fed to devalue the dollar faster," the analysts wrote. Bitcoin's correlation with gold has soared (a safe haven asset) and its correlation with stocks has declined, with a mean reversion after an elevated correlation in calendar years 2020-2022.

$40,000 Bitcoin Coming Soon?

Regardless of any temporary consolidation around the $30,000 mark, Bitcoin traders and analysts remain confident that the overall uptrend will continue.

Michaël van de Poppe, founder and CEO of trading firm Eight, believes: "The key breakout is $27,800, not $28,800. We are ready for $40,000."

Crypto trader Daan compared the current rebound with the previous drop to monthly lows. Daan said: "This is similar to the price action we saw on the way down, and this has happened many times before the price has properly fallen."

Well-known Twitter traders Jelle and Byzantine General predicted by analyzing derivatives trading that the BTC price will return to the $30,000 range, "which may mean that this small rebound is about to end, and consolidation will follow."

According to on-chain data provider Santiment , Bitcoin’s market cap dominance has increased compared to other altcoins in the market. Santiment noted that this “happens during periods of market euphoria or (in this case) fear, and prices can rebound quickly.”

Anonymous trader and analyst “CJ” believes that if the price of Bitcoin closes above $30,000 and the U.S. Dollar Index (DXY) breaks out of the 97-100 range, the market could reach the $33,000 liquidity level. However, if the price of Bitcoin rejects this level and closes below $29,250, it could be a bearish retest.

Macro uncertainty still hangs over the crypto market, with traders watching for the latest signals from the Federal Reserve that it will stop raising interest rates to fight high inflation and when it will start cutting rates. The U.S. central bank's next policy meeting will be held next week, and the latest data on its preferred inflation indicator, personal consumption expenditures, will be released this weekend.