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Bitcoin surges as concerns rise over potential banking crisis in the US
The price of Bitcoin has surged by over 3% in the past 24 hours amidst concerns of another banking crisis in the United States. First Republic Bank's shares fell over 50% on April 25, prompting fears of the bank's impending government receivership. This tactic allows creditors to recover funds experiencing potential default and helps distressed firms avoid bankruptcy.
The news was first reported by Fox News Business Reporter Charles Gasperino, resulting in a rally in Bitcoin's price. According to data from crypto analytics company Santiment, the relationship between Bitcoin and the S&P 500 is waning as the myth that Bitcoin may act as a safe haven during financial crises is reviving.
First Republic Bank has been facing issues since early March, leading to 11 of the largest US banking institutions, including JP Morgan and Bank of America Corp., depositing $30 billion in the troubled bank. On March 26, US authorities reportedly considered creating an emergency lending facility to assist the bank in shoring up its balance sheet.
US banking crisis deepens as Silvergate Bank and Silicon Valley Investment Bank close
However, First Republic Bank reported a total deposit drop of over $100 billion during its first-quarter earnings call on April 23. The bank has planned to cut expenses by downsizing its balance sheet, executive salaries, and office leases, and laying off up to 25% of its employees in Q2.
This year's banking crisis has taken a heavy toll on financial institutions in the US, with Silvergate Bank announcing its closure on March 8, and Silicon Valley Investment Bank being shut down by the California Department of Financial Protection on March 10.
However, US Treasury Secretary Janet Yellen has assured the public that the country's banking sector remains robust and stable. She stated during the Financial Stability Oversight Council (FSOC) Council Meeting on April 21 that the US banking system has strong capital and liquidity positions.