Bitcoin climbed Tuesday as renewed fears of stability in the US financial system bolstered the price of cryptocurrencies.
(Bloomberg) — Bitcoin climbed Tuesday as renewed fears of stability in the US financial system bolstered the price of cryptocurrencies.
The largest digital asset by market value rose as much as 4.4% to $28,892 in New York trading hours, with Ether, the second largest token, also up 3.7%.
The gains come as US regional banks led a selloff in American equities following the collapse and sale of First Republic Bank, which has prompted calls on the Federal Reserve to pause further interest-rate hikes to shield the economy from lagging impacts.
“Ongoing stress associated with vulnerabilities in the banking sector have helped to put a positive spotlight on the value proposition of owning decentralized currencies that can be self-custodied,” Joel Kruger, a market strategist at LMAX Group, said.
Turmoil in the financial sector helps boost the case for a currency outside the purview of any one central bank, advocates say. In its fight against still-high rates of inflation, the US central bank is broadly expected to raise interest rates by a quarter point at its meeting Wednesday. However, traders continue to expect rate cuts by year-end.
“We’re seeing a wave of broad-based US dollar weakness on expectations the Fed will deliver a less hawkish communication at its upcoming meeting,” Kruger said. “This has resulted in yield differentials moving out of the buck’s favor, which in turn has perhaps helped to support crypto assets.”
Eventual cuts to interest rates should bolster risk assets including Bitcoin, which is fueling some of the recent gains in crypto. However, Noelle Acheson, author of the “Crypto Is Macro Now” newsletter, cautioned against expectations for rate cuts in the short term.
“Bringing down inflation has to continue to be a priority for as long as the market can stand it,” she said. “We’re seeing a boost to risk assets, but it might not last for long — a lot depends on the employment data this coming Friday.”
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