Bitcoin amid recent banking sector situation: simply put, it is no longer a question of yield but safety| FXMAG.COM

Money markets are rising on the belief that the Fed will start cutting rates soon (possibly as early as June)

Recently our team has noticed that price of Bitcoin and other cryptocurrency remain elevated despite the visible banking sector concerns. Tempted by this exceptional situation we reached out to Alex Kuptsikevich, analyst at FxPro, to find out what could we attribute such price action to.

Alex Kuptsikevich (FxPro): Bitcoin, like gold, is experiencing a rise in price due to increased demand amid problems in the US and European banking industries. Investors with large deposits are losing confidence that they will not lose access to their capital if banks fail. Although the US financial authorities have protected depositors' capital at SVB, many investors are asking the reasonable question of whether the Treasury and the Fed can continue to guarantee the protection of money if this domino effect continues. Simply put, it is no longer a question of yield but safety.

Money markets are rising on the belief that the Fed will start cutting rates soon (possibly as early as June)

Alex Kuptsikevich (FxPro): In addition to the panic buying in bitcoin, there is a longer-term trend to consider. In less than two weeks, Fed rate expectations have changed dramatically. Money markets are rising on the belief that the Fed will start cutting rates soon (possibly as early as June). This is an unlikely scenario, but it contrasts sharply with the 75-point rate hike expected three weeks ago. The rule works: the softer the expected financial conditions, the higher the demand for risky assets, and bitcoin is the brightest representative of this class.

Alex Kuptsikevich (FxPro): Moreover, bitcoin's rally started at a good technical point. The leading cryptocurrency started buying back on the decline towards its 200-day moving average, confirming the return of the long-term bullish trend. In the short term, the rally looks overheated, but beyond the local correction, we see a very bullish outlook for the cryptocurrency market.

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Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.