Bitcoin price experienced a blow Wednesday, May 2, when it fell below the critical $28,000 threshold after a four-month run of gains. The alpha coin was on a roll throughout April, recording its longest streak of consecutive monthly gains since 2021.
However, the latest drop in Bitcoin’s value raises concerns about the sustainability of its recent surge, leaving investors wondering whether this is just a minor hiccup or the start of a larger market correction.
Bitcoin has lost 2% in the previous 24 hours, and its value has fallen below $28,000, according to CoinMarketCap, and is now at $27,974. Furthermore, its 2.17% gain over the last seven days demonstrates Bitcoin’s ability to withstand market fluctuations while remaining stable.
Nonetheless, Bitcoin’s recent 73% recovery from the 2020 crypto market crash has stalled near $30,000, leaving traders eagerly awaiting new catalysts to boost the cryptocurrency’s value.
The idea that the US Federal Reserve would ultimately adopt a more flexible monetary policy, as well as the claim that the US financial crisis has damaged faith in fiat money, has propelled this increase. “The market is very jittery as it waits to see what happens to First Republic Bank,” said Adrian Przelozny, CEO of cryptocurrency exchange Independent Reserve, to Bloomberg.
The failure of Silicon Valley Bank (SVB) and Signature Bank due to huge withdrawals has alarmed investors and depositors, who are now concerned that First Republic Bank will be the next institution to fall.
In recent weeks, the bank’s rich depositors have begun shifting cash to bigger, more established banks seen to be less likely to fail. According to the Wall Street Journal, depositors at First Republic Bank have withdrawn around $70 billion since SVB’s bankruptcy earlier this month, raising worries about a deposit run.
The bank’s high proportion of uninsured deposits (68%), which exceeds the FDIC’s $250,000 limit, has contributed to investors’ concerns since it puts a major amount of the bank’s money at risk.
While federal regulators intervened to protect SVB’s uninsured deposits due to the systemic risk they posed to the financial system, First Republic depositors are unwilling to take the same risk, fearing their funds will not be protected to the same extent.
Consequently, the bank faces a mass withdrawal of deposits, which may cause it to fail and send shockwaves across the financial system. Meanwhile, according to Bloomberg data, Bitcoin’s recent four-month winning streak through April is the longest since the six-month advance leading up to March 2021.
Four-month winning streaks in Bitcoin have historically been correlated with a 260% increase in the following year, signaling the cryptocurrency’s potential for long-term development. This historical data offers a ray of light to investors waiting for Bitcoin’s value to revive after its recent drop.