A visual representation of the cryptocurrency Bitcoin in London, England on November 20, 2018.
Jordan Mansfield | Getty Images News | Good pictures
Cryptocurrencies rose on Wednesday as investor concerns about the U.S. banking sector resurfaced, with First Republic Bank struggling to avoid another collapse.
Bitcoin rose 8% to $29,828.25, according to Coin Metrics. That helped lift Ether, which advanced 6% to $1,957.02. Both crypto assets are below key levels of $30,000 and $2,000, respectively, which they first traded at two weeks ago last year.
Bitcoin had been trading sideways for several days, with volatility reaching its lows in early March, before the banking crisis began and became one of the cryptocurrency’s biggest upside catalysts this year. Now, according to Bitwise Asset Management’s Chief Investment Officer Matt Hogan, rumors of First Republic and its potential failure could help re-ignite the cryptocurrency’s price action.
“Crypto has been rallying during banking crises, and it looks like the banking crisis isn’t over yet,” Hogan said.
Republic shares fell nearly 50% on Tuesday after reporting a massive drop in deposits in the first quarter as customers pulled their cash following the collapse of the Silicon Valley bank. CNBC’s David Faber reported that the next few days are critical for the company, as other banks and federal officials seek to put together a recovery plan.
Bitcoin rallied 22% in March as the crisis among US regional banks opened investors’ eyes to the diversity of bitcoin’s narratives, and particularly its potential uses as a hedge against uncertainty and an alternative banking system.
“Bitcoin continues to vacillate between being the ultimate lifeboat from the current banking system and the leading risk-on asset,” said James Lavish, managing partner at Bitcoin Opportunity Fund. “With the First Republic now on the brink of collapse, Bitcoin is a safe haven against uncertain bank deposits.”
As the crypto rallied, the US dollar index moved lower and was on pace for its worst day since April 12, when bitcoin traded at its highest this year. Both have an inverse relationship.
Meanwhile, bitcoin’s 30-day rolling correlation with gold has risen since March and now stands at 57%, according to crypto data provider Kyco.
—CNBC’s Gina Francola contributed reporting