Bitcoin, the world’s largest cryptocurrency, climbed to its highest level in nine months on Monday as turmoil in the banking sector drives some investors to turn to digital assets. The cryptocurrency has built on its best week in four years, rising 26% last week, its best weekly gain since April 2019, and soaring some 40% in the last 10 days. Bitcoin rose as high as $28,567 on Monday, its highest since mid-June, and was last up 0.9%.
The surge in Bitcoin’s price is mainly due to growing expectations that central banks will slow the pace of interest rate hikes in response to the turmoil in the banking sector. This is expected to drive investors towards alternative investments such as cryptocurrencies, which are perceived to offer higher returns.
According to Tony Sycamore, an analyst at IG Markets, the stunning rally in Bitcoin’s price is also the result of the banking crisis, predicting a move towards $32,000 should Bitcoin hold above the key support level about $25,000. Other market players predicted that Bitcoin would benefit from central bank efforts to bolster liquidity in the global financial system.
Top central banks, faced with the risk of a fast-moving loss of confidence in the stability of the financial system, moved on Sunday to bolster the flow of cash around the world. Such a global response has not been seen since the height of the COVID-19 pandemic.
Traditional assets such as banking stocks and bonds plummeted on Monday after UBS sealed its state-backed takeover of Credit Suisse, a deal orchestrated in an attempt to restore confidence in a battered sector. The move towards digital assets such as Bitcoin has put traditional assets under pressure, with many investors seeking refuge in cryptocurrencies.
The rise in Bitcoin’s price is a clear indication that investors are looking for alternatives amid the current financial turmoil. With the global economy still reeling from the impact of the COVID-19 pandemic, it is likely that we will continue to see a rise in the adoption of cryptocurrencies as a way to diversify investment portfolios.
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