Bitcoin: Is it Benefiting from Negative Data on the US Banking Sector?
Bitcoin has been performing exceptionally well in recent weeks, experiencing a surge in value. At the time of writing, the price of Bitcoin has increased by 1.58 percent, reaching $31,255. It is worth exploring whether this surge could be attributed to new negative data emerging from the US banking sector.
In March 2023, Bitcoin gained traction during a period of stress within the US banking sector. This stress ultimately led to the collapse of certain banks, causing people to lose confidence in the traditional financial system. Bitcoin, designed by Satoshi Nakamoto to weather such crises, attracted many users during this time.
One notable bank, Bank of America, appears to be the most severely affected with $100 billion in unrealized losses at the end of the first quarter. Wells Fargo and JPMorgan Chase both reported $40 billion in unrealized losses, while Citigroup accounted for $25 billion. Should these banks fear a situation similar to Silicon Valley Bank, which faced difficulties in March after incurring a $1.8 billion loss from its bond portfolio?
Bank of America has already made it clear that it has no intentions of selling its submerged bonds to avoid materializing these losses. According to the Financial Times, the bank states, “BofA says it has no plans to sell its submerged bonds to avoid crystallizing losses now on paper.”
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Federal Reserve is not Worried
Annually, the US Federal Reserve, also known as the central bank, performs stress tests on the 23 largest banks in the country. These tests simulate a severe recession to assess the banks’ resilience. Based on this year’s stress tests, the Federal Reserve concluded that these major banks are adequately prepared for a severe recession and would survive it.
While this suggests that the likelihood of a new banking crisis is currently minimal, accidents can still occur unexpectedly. After all, few anticipated the tentative banking crisis in March. However, it is important to note that many of the aforementioned banks are still vulnerable to experiencing a situation akin to Silicon Valley Bank. Could this vulnerability potentially contribute to another boost for Bitcoin?
Tags: America, Banks, Bitcoin, Federal Reserve, Recession