Despite the failure of significant crypto-focused banks, Bitcoin is up 50% this year, outperforming major stock indices and commodities.
Bitcoin started trading at just over $16,500 on January 1. Thanks to a rally that started on Sunday, it was circling around the $25,000 mark on Wednesday.
After a number of significant collapses of projects and hedge funds, bankruptcies, liquidity problems, and the fall of FTX, one of the largest cryptocurrency exchanges in the world, bitcoin’s price fell by 65% in 2022, prompting this year’s price spike.
Given the closure of Silvergate Capital and Signature Bank, two of the largest lenders to the cryptocurrency industry, the recent growth has come as somewhat of a surprise. Moreover, Silicon Valley Bank, which is regarded as the foundation of the technological startup even the industry failed.
Bitcoin’s 50% increase in 2023, according to Antoni Trenchev, co-founder of cryptocurrency trading platform Nexo, “is a reflection of how depressed it was after the FTX crash, the changing interest rate outlook, and the fall (and resurrection) of SVB,” he told CNBC.
Bitcoin is still down more than 60% from its November 2021 peak of around $69,000.
Here are a few of the primary causes for bitcoin’s increase.
bank failures
While the bankruptcies of Silvergate, Signature Bank, and SVB sent shockwaves through the financial markets, Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, believes that those very failures may have contributed to bitcoin’s recovery.
The events surrounding the bankruptcy of SVB and other banks this past week also brought attention to the strength of decentralized currencies that individuals can fully control and own, according to Ayyar. Many more individuals are starting to understand the concept of decentralized money now.
Source (CNBC)