The price of cryptocurrencies fell on Monday as investors bet that First Republic Bank’s acquisition could end the financial crisis. This has been the primary driver of Bitcoin’s rally this year. Bitcoin fell about 4.2% to 28,137.76 to start the week and month, according to Coin Metrics. Ether lost 4% to 1,828.81. First Republic was taken over by regulators on Monday, making it the third failure of a U.S. bank this year and the largest since the 2008 financial crisis. JPMorgan Chase will acquire the majority of the deposits and assets of the company. Last week, bitcoin rallied in April as troubles at the bank unfolded. Trading of the cryptocurrency has been choppy, however, as investors straddle the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession, and an increasingly bearish narrative building around the U.S. dollar. “It’s unclear whether the banking crisis narrative can continue to be a boon for bitcoin,” said Alex Thorn, head of firmwide research at Galaxy. “Overall, the market lacks clear positive near-term catalysts, with supply issues overhanging bitcoin … That being said, bitcoin accumulation by small addresses is outpacing issuance, and we expect Ethereum staking to increase, each of which provides a supportive supply narrative.”
“Outside of crypto-native factors, we expect a back-of-the-year macro environment to be characterized by tightening, recession, and an expanding multipolarity in the global economy, all of which can be supportive of gold and bitcoin,” he added. The cryptocurrency market has been expected to slow down from its first-quarter rally, although it has gained about 70% for the year after finishing down more than 60%. April marked the first time Bitcoin had a fourth consecutive positive month in two years. “Bitcoin and ether started 2023 inorganically cheap, allowing for plenty of room to move higher off a low-base effect,” Thorn said. “A widening banking crisis became evident in March, and the contrast with Bitcoin’s transparent and decentralized nature provided a further leg up for Bitcoin, while Ethereum’s successful Shanghai upgrade provided a catalyst for ethereum.”
