Increased Bitcoin demand from institutional investors led by the ETF frenzy and new stablecoins launch has widened crypto liquidity and trading volume.
The United States market has in the past few months doubled down its interest in digital assets as the Federal Reserve pushes its limit to lower the inflation to the desired 2 percent. With Bitcoin’s current inflation below 1 percent, and expected to halve in less than a year, institutional investors in the United States led by BlackRock Inc (NYSE: BLK) have shown increased interest in Bitcoin and other digital assets. As a result, Bitcoin price has continued to gain more momentum in favor of banking stocks that have struggled YTD. Furthermore, the banking sector experienced a contraction period earlier this year when several regional banks in the United States and around collapsed due to low deposits and customer retention.
According to the latest crypto price oracles, Bitcoin suddenly rebounded from a bearish outlook to briefly trade above $30k on Tuesday. Undeniably, several reasons contributed to the sudden rise of Bitcoin on Tuesday. Among the top reasons include the increased demand by institutional investors, which led rating agency Moody’s to put the U.S. banking sector on a downgrade watch.
Notably, the firm changed its outlook to negative for 11 banks, including Capital One, Citizens Financial, and Fifth Third Bancorp. The downgrade follows the recent revelation of banks struggling to make profits and generate internal capital according to Q2 results.
“US banks continue to contend with interest rate and asset-liability management (ALM) risks with implications for liquidity and capital, as the wind-down of unconventional monetary policy drains systemwide deposits and higher interest rates depress the value of fixed-rate assets,” Moody’s analysts Jill Cetina and Ana Arsov said in a research note.
Notably, experts believe Bitcoin price is well positioned to rally beyond $100k in the next few years, with some predicting $1 million per coin by 2030. The ambitious rally is expected to be fueled by global hyperinflation and mainstream adoption of digital assets. As a result, the traditional banking sector has continued to bleed its customers into the new banking industry using modern technology like Artificial Intelligence (AI) and blockchain.
“Bitcoin is holding strong. The correlation between the stock market and bitcoin is decoupling as bitcoin has proven to be a beneficiary of banking turmoil,” Greg Magadini, director of derivatives at Amberdata.
Most crypto analysts believe Bitcoin price will not revisit its ATH and beyond until after next year’s halving as it has performed historically. The Bitcoin halving is expected to take place during the first half of 2024 when the BTC miners will receive half the reward per block. Meanwhile, an accumulation phase could lead to a Bitcoin correction towards $25k as the top coin establishes a solid support base.