Bitcoin Passed The Bank Stress Test!

Bitcoin (BTC) is now being seen as a safe investment option amidst the current turmoil faced by traditional stocks and bonds. Despite being known for its volatility, the major cryptocurrency has been performing well while a banking crisis has caused the S&P 500 to drop and gold to rise.

This has led experts to suggest that owning bitcoin could be a good strategy in a scenario where there are frequent bank runs due to central banks trying to combat inflation with fast rate hikes. Bitcoin's correlation with traditional assets has decreased and it has instead rallied alongside gold, fulfilling one of its creator's visions of it being a haven for distressed investors.

The recent weeks have seen banks such as Silicon Valley Bank (SVB) and Silvergate collapse, while Credit Suisse has struggled. While Bitcoin has been performing well during the banking crisis, not all digital assets have been immune. Circle USD, the second largest stablecoin, lost its 1:1 peg to the US dollar when it was revealed that its reserves were held at the now-closed Silicon Valley Bank. Concerns over USDC's ability to maintain its peg led to a decline in its market cap, while Tether's market cap increased.

Some market participants speculate that the withdrawals from USDC were reinvested in Bitcoin, which helped to fuel its recent rally. However, some experts caution that it's too early to conclude that Bitcoin is a reliable alternative during a banking crisis, but the current rally will test its decentralized and non-sovereign asset property.

Sources:

https://www.brecorder.com/news/40232630

https://mobile.twitter.com/Reuters/status/1638122137515950082

https://www.reuters.com/markets/currencies/cryptoverse-bitcoin-passes-bank-stress-test-2023-03-21/

https://www.investing.com/news/economy/cryptoverse-bitcoin-passes-the-bank-stress-test-3035251