Should Crypto Investors Be Wary of Another US Banking Crisis?

9 months ago 3

ARTICLE AD BOX

As US regional bank stocks plummet, with New York Community Bancorp (NYCB) leading the descent, crypto investors cast a wary eye on the unfolding banking crisis.

The KBW Regional Banking Index has seen a huge drop. It’s the biggest since New York’s Signature Bank’s collapse last year. This raises worries about the stability of regional banks.

Is Another US Banking Crisis Looming?

The recent plunge in bank stocks was surprising, catching options traders off guard. A quick change from optimism to pessimism is clear. A rise in put options shows this.

It points to growing concerns about regional banks’ health. The Federal Reserve’s choice to keep interest rates high adds to this worry. The decision further pressures the banks’ loan earnings.

NYCB’s sharp decline in share value, triggered by a dividend cut and surprise loss, highlights the precarious position of banks hovering near the $100 billion regulatory threshold. This scenario affects NYCB, which acquired assets from the defunct Signature Bank. It also impacts other banks like Zions and Comerica, raising red flags about their financial stability.

Is a Bitcoin Correction Incoming?

Amidst these banking sector woes, the co-founder of crypto exchange BitMEX – Arthur Hayes, cautiously eyes the falling price of Bitcoin (BTC). He noted the correlation between Bitcoin’s recent peak and the two-year US treasury yields rise.

While debunking the argument that Bitcoin’s slump is solely due to the outflows from the Grayscale Bitcoin Trust, Hayes pointed to broader economic forces, including concerns over the renewal of the Bank Term Funding Program (BTFP).

“All assets, including crypto, will fall together as the market hyperventilates at the prospect of the free market working once more and cleansing the system of insolvent banking institutions,” Hayes said.

Hayes’ short-term prediction for Bitcoin is bearish, foreseeing a potential support range between $30,000 and $35,000, influenced by the upcoming decision on the BTFP renewal. However, his long-term outlook remains optimistic. Hayes projected a significant rally in Bitcoin’s price, driven by decreasing interest rates, the crypto halving event, and the influence of spot Bitcoin ETFs.

Other analysts echo his bullish stance, with predictions ranging from $100,000 to as high as $1 million for Bitcoin’s future value.

The instability in regional banking, coupled with macroeconomic factors, could impact the crypto market significantly. While long-term prospects for cryptocurrencies like Bitcoin seem promising, the short-term environment is uncertain.