Bitcoin price suffered a setback today, May 2, as its price slipped below the crucial $28,000 level following a four-month-long solid streak.
Throughout April, the alpha coin had been on an upward trajectory, experiencing its longest stretch of consecutive monthly gains since 2021.
However, the latest dip in Bitcoin’s value raises questions about the sustainability of its recent surge, leaving investors wondering whether this is merely a minor hiccup or the start of a more significant market correction.
Bitcoin Price Loses $28K Handle
Bitcoin experienced a 2% drop in the last 24 hours, and its value, as reported by CoinMarketCap, dropped below the $28K level, and currently at $27,974. Additionally, its 2.17% increase over the past seven days indicates Bitcoin’s ability to withstand market fluctuations and remain stable.
Nonetheless, Bitcoin’s recent 73% recovery from the 2020 crypto market crash has come to a halt near the $30,000 level, leaving traders eagerly waiting for new catalysts to boost the cryptocurrency’s value.
This rally has been driven by the belief that the US Federal Reserve will eventually adopt a more relaxed monetary policy and the argument that the US banking crisis has eroded trust in fiat currency.
“The market is very jittery as it waits to see what happens to First Republic Bank,” Adrian Przelozny, head of crypto exchange Independent Reserve, told Bloomberg.
First Republic Bank Crisis Sparks Fears
The collapse of Silicon Valley Bank (SVB) and Signature Bank due to massive withdrawals has caused alarm among investors and depositors, who now fear that First Republic Bank could be the next institution to fail.
In recent weeks, the bank’s wealthy depositors have been transferring their funds to larger, more established institutions perceived as less likely to collapse.
According to the Wall Street Journal, First Republic Bank’s depositors have withdrawn approximately $70 billion since SVB’s collapse earlier this month, triggering concerns of a potential run on deposits.
The bank’s high rate of uninsured deposits, at 68%, has added to investors’ anxiety, as this exceeds the FDIC’s $250,000 limit, leaving a significant portion of the bank’s funds at risk.
While federal regulators intervened to protect SVB’s uninsured deposits due to the systemic risk it posed to the financial system, depositors at First Republic are not willing to take that same risk, fearing their funds may not receive the same level of protection.
As a result, the bank is at risk of a mass withdrawal of deposits, which could potentially lead to its collapse and send shockwaves through the financial industry.
Meanwhile, according to data compiled by Bloomberg, the Bitcoin price recent four-month winning streak through April marks the longest stretch of gains since the six-month advance leading up to March 2021.
Over the past decade, four-month winning runs in Bitcoin have historically been associated with an average surge of 260% in the subsequent year, indicating the cryptocurrency’s potential for sustained growth.
This historical data provides a glimmer of hope for investors who have been anxiously waiting for Bitcoin’s value to recover after its recent decline.
-Featured image from Freepik