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President Joe Biden acknowledged the fragility of the US banking system during his speech at the National Small Business Week on May 1, and the government will implement measures to ensure that the financial system remains secure.
Bitcoin Back to $28,100 After Biden Acknowledges The Fragility of the US Banking System
Despite the recent reassurance from President Biden regarding the stability of the US banking system, the prices of Bitcoin and most other cryptocurrencies have continued to decline. In the last 24 hours, Bitcoin has been trading at $28,100, representing a 4% drop from its previous value. Furthermore, Bitcoin’s current price is approximately 10% lower than its peak value in April 2023.
The collapse of First Republic Bank, the third major bank to fail in less than two months, triggered a stock price crash in late April 2023, while Bitcoin prices continued to climb higher, reaching as high as $30,000 on April 26.
As of April 26, First Republic Bank’s stock fell by as much as 50%, and its trading was halted several times at the New York Stock Exchange. The San Francisco-based bank disclosed that it was hemorrhaging deposits, losing over $72 billion as clients moved their funds elsewhere in Q1 2023.
The crisis and bank run at First Republic Bank were compounded by the issues that emerged in the US banking system around the same time as two other banks, the Silicon Valley Bank (SVB) and Signature Bank, came under fire.
During the second week of March, there was a bank run at SVB that resulted in a flood of withdrawal requests and the temporary halt of its services. At around the same time, First Republic Bank received a $30 billion capital injection from 11 lenders.
In this context, with more banks in the United States facing a liquidity crisis, President Biden reassured depositors that the government would intervene to calm the waters and stabilize the sector.
Specifically, the government will protect depositors, including small businesses that need to process payroll for workers. Biden stated that all depositors would be protected, shareholders would lose their investments, but taxpayers would not be liable.
Despite this promise of intervention, the Bitcoin price action has been unresponsive, retracting from its April highs. However, any threat to the legacy financial system is bound to support an increase in cryptocurrency over the long term.
On-Chain Data Shows Bitcoin Miners Selling Off Coins, Implying Bearish Price Trend
Bitcoin miners have been selling off their coins, according to on-chain data, which could indicate a bearish trend for the cryptocurrency’s price.
The “miner reserve,” a measure of the total amount of Bitcoin held by all miners, has been decreasing recently, suggesting that miners are withdrawing their coins for selling purposes. In contrast, an increase in this metric indicates that miners are accumulating Bitcoin, which could be bullish for the price.
As the rally in Bitcoin began in January, the miner reserve metric witnessed a significant decline, indicating that investors might have sold their holdings to reap profits. Since then, this indicator has remained relatively unchanged or decreased, implying that miners have not been accumulating Bitcoin lately.
The recent sharp leg down in the miner reserve coincided with Bitcoin’s plunge from the $30,000 mark, indicating that miners were selling their Bitcoin again. Although these investors have been selling a net amount of coins recently, the actual scale of their selling is not significant compared to their total reserve. Miners currently hold upwards of 1.82 million BTC in their wallets.
The quant suggests that miners holding onto their coins for longer periods could be crucial to maintaining the bullish trend’s health. It remains to be seen whether these holders can reverse the trend or continue selling Bitcoin in the short term, both of which could have a massive impact on BTC’s price.
Crypto Firm Warns of Potential Implications for Bitcoin and Ethereum Investors Amid DCGs Financial Troubles
Digital Currency Group (DCG), Genesis, and Grayscale, cryptocurrency firm Arcane Research have issued a warning to investors in Bitcoin and Ethereum.
Analyst Vetle Lunde has cautioned that investors should closely monitor DCG’s ongoing financial distress, as it may have significant implications for the crypto markets.
Arcane Research, a crypto firm, has issued a warning about Digital Currency Group’s financial troubles. If DCG goes bankrupt, it may have to sell its assets, including its positions in Grayscale Bitcoin Trust (GBTC), Grayscale Ethereum Trust (ETH), and other Grayscale trusts.
According to Arcane Research, a potential solution called Reg M could enable shareholders of GBTC, ETH, and other trusts to get their shares at net asset value, thus addressing the problem of the fund’s value being lower than the Bitcoin spot price.
If the trust were to be dissolved, there would be a sudden influx of GBTC shares into the market, leading to a surge in arbitrage opportunities. This, in turn, could potentially cause further downside in the already volatile crypto markets.
However, in the long term, Arcane Research views this scenario as a positive development as it would finally remove the “Grayscale widowmaker trade” that has been a burden on the crypto market. In fact, this event could even mark the market bottom, according to analyst Vetle Lunde.
DCG, the parent company of Grayscale Investments, is facing mounting pressure from various stakeholders. Gemini founder Cameron Winklevoss recently accused DCG of engaging in bad faith tactics to delay the approval of a Bitcoin ETF.
This has caused concerns among investors who fear that the company may be deliberately stalling the approval process to maintain its dominance in the market.
Adding to DCG’s troubles, Valkyrie Investments has expressed interest in becoming the new sponsor and manager of GBTC, one of the largest Bitcoin trusts in the world.
In addition to this, Valkyrie has announced the launch of a new opportunistic fund that aims to take advantage of the discounts that GBTC is currently trading at. This move could further threaten DCG’s position as the leading provider of Bitcoin investment vehicles.
The dissolution of the Grayscale widowmaker trade would be a significant relief for the crypto market, and Bitcoin’s price, and could mark a new phase in its development. However, it is crucial to consider the potential consequences and prepare accordingly.
One of the ways to prepare is to diversify the crypto portfolio with presale cryptos. The most recent ones come with ample utilities and present major upsides for the blockchain industry as a whole – which translate to parabolic gains for those who move in early.
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