As a result of the bankruptcy turmoil in the U.S. banks, Bitcoin’s market value has increased by up to 60% during 2023.
Investors’ uncertainty about the traditional banking system has been the biggest driver for Bitcoin’s value increase.
In this weekly recap, we delve deeper into the reasons behind the increase in value.
Bitcoin’s market value has increased by 60% this year
The market value of Bitcoin has increased by 194 billion dollars this year. In percentage terms, this corresponds to a 66% increase. If you compare that growth to Wall Street’s top stocks, Bitcoin easily beats them.
There are several reasons for the increase in the value of Bitcoin, such as the limited nature of Bitcoin, the increase in the use of Bitcoin, the mistrust of investors towards the modern banking system, and the value of Bitcoin being on a stable level in a volatile market.
When you look at Bitcoin’s history, it’s no wonder that investors have deep confidence in it. Bitcoin has at least doubled its value in 2009-2013, 2015-2017, and 2019. The trend is believed to be favorable despite the ongoing crypto winter.
Bitcoin’s independence from banks or any single centralized entity is also emphasized in an unstable market situation. It is precisely this independence from centralized bodies that also makes it very independent of civil changes.
Let’s go through the facts behind the recent rise in the value of Bitcoin in a little more detail.
U.S. banking crisis
In March, three banks collapsed in the United States. The banks in question were Signature Bank, Silvergate Bank, and Silicon Valley Bank.
Silicon Valley Bank (S.V.B.) was by far the largest of the banks mentioned above. S.V.B.’s size is indicated by the fact that it was among the 20 largest banks in the United States.
All these banks were known for their positive and open attitude towards cryptocurrencies; therefore, their collapse also affected the crypto market. However, the crypto market recovered from the failure of the banks relatively quickly – traditional investors did not.
Traditional investors fear that banks drifting into bankruptcy will lead to a chain reaction, resulting in more and more banks difficulties. This was last seen during the financial crisis in 2007-2008.
The U.S. government does not want to repeat the mistakes of the financial crisis, so they are acting quickly this time.
Just days after S.V.B.’s bankruptcy filing, the U.S. Federal Reserve announced that it would set up a $25 billion emergency package for banks to ensure they had enough liquidity to meet their customers’ needs.
However, this announcement did not reassure investors, and bank rates experienced significant turbulence as uncertainty gripped the market.
The fate of Credit Suisse
Just a few weeks after the bankruptcies of Signature, Silvergate, and S.V.B., the banking sector experienced dark moments again when Credit Suisse announced that it would accept a takeover offer from UBS (Union Bank of Switzerland).
Credit Suisse is a Swiss banking company founded in 1856, which opened its first branch outside of Switzerland in New York in 1942. It is a 166-year-old bank with 50,480 employees worldwide; turnover last year was 14.92 billion euros.
Although the announcement of the sale of an operator with such an old and rich history is apt to create more uncertainty in the market, the biggest concern lies in Credit Suisse’s purchase amount. At the moment, it appears that UBS can buy the entire Credit Suisse business for only about three billion dollars.
The deal will make $16 billion worth of government bonds managed by Credit Suisse worthless. The Swiss financial regulator Finma has already approved the transaction. It is still difficult to predict how the declaration of worthless government bonds worth 16 billion euros will affect investors’ confidence in government bonds.
So, after all this, it’s no wonder that investors have been adding Bitcoin to their portfolios. Bitcoin’s price has risen well amid the banking turmoil, making it a desirable investment instrument.
As consumer uncertainty about traditional banking grows, the phrase “Be Your Own Bank” associated with Bitcoin only grows in importance.
Wall Street’s runaway losses
According to data collected by CompaniesMarketCap.com, the six largest U.S. banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs – have lost a total of $100 billion in market value in 2023.
Bank of America’s share has performed the worst among the above banks’ shares. Its value has decreased by almost 17% since the beginning of the year.
Goldman Sachs stock is down nearly 12% year-to-date, followed by Wells Fargo (down 9.74%), JPMorgan Chase (down 6.59%), Citibank (down 3.62%), and Morgan Stanley (down 0.84%).
U.S. bank valuations have fallen due to the ongoing U.S. regional banking crisis.
The crisis was about to expand further with the near collapse of First Republic Bank, but it was saved at the last minute by a combined injection of 30 billion dollars from Wells Fargo, JPMorgan Chase, Bank of America, and Citigroup, among others.
Deja vu from the banking crises in Greece and Cyprus
Bitcoin’s rise in value in the face of the budding U.S. banking crisis is similar to Bitcoin’s response to the bank collapses in Cyprus and Greece.
The price of Bitcoin rose as much as 5,000% amid the Cyprus financial crisis in 2013. The crisis was caused mainly by the exposure of Cypriot banks to over-indebted regional real estate companies.
Undisturbed by the banking crisis, Bitcoin was a safe and functional alternative for storing and transferring money for Cypriots dissatisfied with the banking crisis.
In March 2013, the situation was so dire that the Cypriot authorities closed all banks to prevent a bank run.
When Greece faced a similar crisis in 2015 and imposed capital controls on citizens to prevent a bank run, Bitcoin’s price increased by 150%.
Uncertainty about the stability of the traditional banking system and falling real interest rates create a suitable environment for Bitcoin to recover and increase its market value even more.
The rise of Bitcoin in 2023 – F.A.Q
The situation cannot yet be directly described at this stage as a banking crisis. The situation is worrying, but the U.S. central bank keeps a close eye on the situation and does not hesitate to act if the situation worsens further.
However, we recommend keeping an eye on the situation because, as the past weeks have shown, even significant changes can happen quickly.
Bitcoin is independent of banks and other individual centralized entities. It is precisely this independence from centralized bodies that also makes it very independent of social changes.
Uncertainty about the stability of the traditional banking system and falling real interest rates create a suitable environment for Bitcoin to increase its market value further.
Coinmotion is Finland’s leading service for securely buying, selling and storing bitcoins. Registering as a Coinmotion user gives you a bitcoin wallet that works in the browser.
You can deposit euros into the service through Finnish online banks. After depositing euros in the service, you can use them to buy bitcoins in your wallet. So you can use the service like a bank account to store both euros and bitcoins.
You can create a Coinmotion account for yourself and get a bitcoin wallet. You can receive bitcoins in your Coinmotion wallet by giving the sender your wallet address or Q.R. code.
Investing in Bitcoins has become even safer as the most reliable service providers in the industry have developed their security standards.
As always with investing, investing in Bitcoin also involves risks. The value of bitcoins fluctuates more strongly than other currencies, and it should be treated as a high-risk investment.
This fluctuation in value is good to consider, especially if the purpose is to make a short-term investment. Over more than a year, bitcoin’s value development has been bullish throughout its existence.
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