US President Joe Biden spoke at National Small Business Week on May 1 I confess The US banking system is fragile. In a recent statement, the head of state revealed that the government will take measures to ensure that its financial system remains “sound and secure”.
Despite Biden’s comments, Bitcoin and most cryptocurrencies are still down. Bitcoin is down 4% over the past 24 hours and about 10% from its April 2023 high, when it traded at $28,100.
Bank collapse in the United States, President Biden confirms
The president’s comments come in the wake of the collapse of the First Republic, the third major bank to fail in less than two months.
The failure of the bank saw the stock price crash in late April 2023 as bitcoin prices soared, reaching $30,000 on April 26. At this time, the cryptocurrency has recovered after worrying losses from mid-April 2023.
As of April 26, First Republic Bank’s stock had fallen as much as 50% as it was halted from trading several times on the New York Stock Exchange.
San Francisco-based bank open It was hemorrhaging deposits, losing more than $72 billion as customers moved their money elsewhere in the first quarter of 2023.
The crisis and bank management were amplified at First Republic Bank as two banks, Silicon Valley Bank (SVB) and Signature Bank, came under fire just as cracks were beginning to appear in the US banking system.
SVB experienced a flood of withdrawal requests in a bank run as services paused in the second week of March. Around this time, First Republic Bank also said it had received $30 billion in injection capital from 11 lenders.
First Republic Bank’s assets were acquired by the Federal Deposit Insurance Corporation (FDIC) and subsequently sold to JP Morgan Chase in a $10.6 billion deal.
Against this background, and with more banks appearing in the United States as if they were facing a liquidity crisis, Biden assured depositors that the government would intervene to calm the situation and stabilize the sector. Specifically, Biden He said The government protects depositors, including small businesses that need to process workers’ payroll. The Head of State added:
Let me be very clear, all depositors are protected. Shareholders lose their investment. More importantly, it’s not the taxpayers who are in trouble. The (government) actions will make sure that the banking system is safe and sound, and that includes protecting small businesses across the country who need to make payroll for workers.
Bitcoin Unresponsive, Retreat From April Highs
Bitcoin price movement is increasingly in sync with the general macroeconomic environment, especially in response to the state of the US banking system.
For example, when the SVB collapsed in mid-March, bitcoin prices soared, adding 58% from their March 2023 lows before peaking at $31,000.
Right now, prices are falling, reversing from April highs, and not responding to the US promise to intervene to make the banking sector more robust. However, any threat to the old financial system is bound to support the rise of cryptocurrency in the long run.
Featured image from Canva, chart from TradingView