Bitcoin up amid FRC crash

Bitcoin’s price surged more than 3% in the last 24 hours, as fears of another potential bank failure were sparked by First Republic Bank (FRC) shares closing down over 50% on April 25. According to Collective Shift, an Australian crypto education platform, the price of Bitcoin rallied immediately following the news of bankers working with First Republic Bank expecting the institution to go into government receivership. Receivership allows creditors to recover funds experiencing a potential default and assists troubled firms in avoiding bankruptcy.

Data from Santiment, a crypto analytics firm, indicated that the correlation between Bitcoin and the S&P 500 may be dwindling, and the narrative that Bitcoin is a safe haven during the banking crisis began to gather steam once again. First Republic Bank started experiencing issues in early March, which led to 11 of the largest banking institutions in the United States, including J.P. Morgan and Bank of America Corp., depositing $30 billion at the troubled bank.

On April 23, First Republic reported in its first quarter earnings call that total deposits had plummeted by over $100 billion, and it would be “pursuing strategic options” to strengthen its financial standing. The earnings report highlighted that the embattled firm plans to downsize its balance sheet, cut expenses by slashing executive salaries, slim down on office leases, and lay off an expected 20% to 25% of its employees in Q2.

The banking crisis has taken a heavy toll on financial institutions in the United States this year. On March 8, Silvergate Bank announced that it would be closing its doors 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 turmoil, U.S. Treasury Secretary Janet Yellen has reiterated that the American banking sector remains robust and stable, telling the Financial Stability Oversight Council meeting on April 21 that “Our banking system remains sound, with strong capital and liquidity positions.”