Bitcoin (BTC) has experienced a surge of more than 3% in the past 24 hours as deposit concerns at First Republic Bank (FRC) have sparked fears of yet another banking crisis in the United States. On April 25, FRC shares closed down by over 50%, leading bankers to believe that the bank may soon go into government receivership, a tactic that allows creditors to recover potential defaulting funds and assists struggling firms in avoiding bankruptcy.
Bitcoin’s Rise
Following Fox News Business reporter Charles Gasperino’s announcement that FRC bankers expect the institution to go into receivership, Bitcoin’s price rallied immediately. The crypto’s price surge highlights the narrative that Bitcoin is considered a safe haven amid the ongoing banking crisis in the US.
Correlation with S&P 500
Data from crypto analytics firm Santiment suggests that the correlation between Bitcoin and the S&P 500 may be dwindling. This correlation was initially used to support the narrative that Bitcoin is a safe haven, but as the correlation weakens, the narrative has once again gathered steam.
First Republic Bank’s Struggles
FRC began experiencing issues in early March, leading to 11 of the largest banking institutions in the US, including Bank of America Corp. and J.P. Morgan, depositing $30 billion at the bank. Although anonymous sources claimed that the bank’s deposits were stabilizing and that it was not at risk of experiencing a sudden run, recent events have proven otherwise.
In its first-quarter earnings call on April 23, FRC reported that total deposits had plummeted by more than $100 billion, and it would be pursuing strategic options to improve its financial standing as quickly as possible. While the bank is yet to clarify what these options are, it plans to downsize its balance sheet and cut expenses by reducing executive salaries, downsizing office leases, and laying off an expected 20% to 25% of its employees in Q2.
Banking Crisis in the US
The banking crisis has taken a toll on financial institutions in the US this year, with Silvergate Bank announcing its closure on March 8 after experiencing a run on deposits. Two days later, Silicon Valley Investment Bank was shut down by the California Department of Financial Protection.
Despite the ongoing turmoil, US Treasury Secretary Janet Yellen has reiterated that the American banking sector remains robust and stable, stating that “Our banking system remains sound, with strong capital and liquidity positions” during the Financial Stability Oversight Council meeting on April 21.
Source: Cointelegraph
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