As investors make a cash run on failing US banks, the overall sentiment for USD is looking more and more gloomy with every passing day. Is this good news for BTCUSD traders?

Since last week’s news of Silicon Valley Bank, Signature Bank, and Silvergate Bank, EURUSD made a bullish 139.7 Basis Point Change showing that USD might be in for a tough week. But all eyes are on Bitcoin after it rocketed 14%.

Let’s dive into current crypto markets and how Bitcoin may behave in the coming days and weeks, speculate on the recent bank failures, and how they may affect the crypto sector and overall investor sentiment.

Recent bank failures: A blow to crypto-friendly institutions

Silicon Valley Bank (SVB), Signature Bank (SBNY), and Silvergate Bank (SI) had been providing banking services to many crypto companies and investors, especially after many traditional banks shunned them due to regulatory uncertainty and compliance issues.

According to CNBC, SVB collapsed on Friday after depositors withdrew more than $42 billion following the bank’s Wednesday statement that it needed to raise $2.25 billion in capital to cover its losses from bad loans. The bank entered receivership on Friday after the trading of its parent company, SVB Financial Group (SIVB), was halted.

SVB was not the only bank to fail last week. Signature Bank, another crypto-friendly institution that had been popular among crypto companies, was also shut down by regulators on Friday after it reported a net loss of $1.3 billion for 2022 due to exposure to risky assets. Signature Bank had been one of the first banks to launch a blockchain-based payment platform called Signet in 2018.

Silvergate Bank, which had been dubbed “the bank of crypto” by some analysts, also announced that it would close its operations last Wednesday after it failed to raise enough capital to meet regulatory requirements. Silvergate Bank had been serving more than 800 crypto clients, including Coinbase, Kraken, Gemini, Bitstamp, and Circle.

The failure of these three banks has raised concerns about the stability and security of the crypto sector, as well as the availability of banking services for crypto companies and investors. Some experts have speculated that this could lead to more consolidation in the industry or more adoption of decentralized finance (DeFi) solutions that do not rely on intermediaries.

If that’s true, then we may see investors running back to Bitcoin to capitalize on USD volatility.

Is Bitcoin a safe haven for traders?

Traditionally, gold has been considered a safe haven asset due to its scarcity and durability,  but Bitcoin has some similarities with gold:

• Scarce - there will only be 21 million Bitcoins ever created

• Durable - it can be stored digitally without degradation 

• Divisible - it can be divided into smaller units called satoshis

• Portable -  it can be transferred across borders without intermediaries 

• Fungible - one Bitcoin is always equal to another Bitcoin

• Verifiable - it can be verified by anyone using cryptography

• Censorship-resistant - it cannot be easily confiscated or controlled by authorities

However, Bitcoin also has some differences from gold.  It is highly volatile, influenced by technological innovation, regulated by different jurisdictions, and affected by environmental factors.

BTC chart moves

The first retrace after the March 11th spike bounced at the 0.236 level of the Fibonacci, followed by a second retract at the 0.382 level, supporting signs of a continuing uptrend, although it did not intersect with the moving average yet. The stochastic shows a significant oversold period throughout, again supporting a bullish forecast.

Conclusion

All signs point to a continued rise for BTCUSD. Technically, both Fibonacci retraces and the Stochastic support a bullish forecast. 

Fundamentally, Bitcoin and other cryptocurrencies have reacted bullishly to the news of the crypto-related banks taking a hit, and there are no fundamental announcements on the horizon that could reverse that trend.

Moreover, When there is high inflation or currency devaluation: investors and traders can turn to Bitcoin as a hedge against fiat currencies that are losing purchasing power due to excessive money printing or economic mismanagement. And with US inflation high and still rising, that assumption also supports a bullish BTC.

Consider setting lower leverage than usual on your Exness trading account, as high volatility may return without warning. As always, be cautious when trading volatile instruments, as many large investors may see the news and BTC technicals as an opportunity to make a quick hit & run investment, and when that happens, retail traders joining a trend that is already well in progress tend to pay after the pump & dump is over. Be sure to protect your equity with stop loss, and set modest short-term take profit levels.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.