A representation ofBitcoin is seen in an illustration picture.
As the crisis stalks the traditional world of bonds and stocks,Bitcoin is suddenly looking like a safe haven.
A banking meltdown causes markets to be in the arms of a recession, and the infamously volatile coin seems positively hale and hearty.
The price of digital currency has gone up 21% this month, while the S&P 500 has lost 1.4% and gold has gained 8%.
If you were going to describe an environment where there were successive bank runs because central banks are trying to fight inflation with fast rate increases, that is pretty close to the thesis for owning bitcoin as you've heard, said St phane Ouellette, CEO of FRNT Financial.
The criptocurrency has sever its ties with stocks and bonds and tagged on to a rally in gold, fulfilling one part of Satoshi Nakamoto's dream - that bitcoins can serve as a refuge for suffering investors.
A measure of 1 indicates that the two assets are moving in lock step, and the 30 day correlation with the S&P 500 has slid to negative 0.12 over the past week.
A sell off in banks has wiped out hundreds of billions of dollars in market value and forced the U.S. regulators to take emergency measures. Silicon Valley Bank and Silvergate have gone down for the past couple of weeks while Credit Suisse has teetered on the brink.
Let's not carry away, though. The bearish argument would be that these dynamics are temporary, and ultimately this rally is not going to sustain, said Ouellette.
It remains to be seen if the bullishness of digital currency will last as attention shifts to the Federal Reserve policy meeting this week, where the central bank must walk a fine line as it fights inflation and bank stresses.
The allure of the digital currency hasn't always been about safety.
Some short sellers have had to cut their bets and buy coins back because of the rapid price rise. The data from Coinglass shows that traders liquidated $300 million worth of positions on Monday, with most of it being $178.5 million short positions.
According to CoinMarketCap, it has now command nearly 43% of the total market, its highest share since June, while the total market value has gone up 23% to $1.1 billion since March 10.
Henry Elder, head of decentralization DeFi at Wave Digital Assets said that the return to the core ethos of bitcoin is that of a financial asset that is independent from the opacity and meddling of the centralized financial system.
The mainstream bank crisis has fueled interest in DeFi, with the total value of token linked to such platforms rising to $49 billion from $43 billion over the past week, according to DappRadar.
Some areas of the digital world have been affected by the banking fallout, though not all of them have been immune to it. 2 stable coin Circle USD or USDC lost its 1: 1 peg to the dollar after disclosing its reserves were parked at the shuttered Silicon Valley Bank.
As worries spread over USDC's ability to maintain its peg, its market cap fell to $36.8 billion last Friday, from $43.8 billion a week earlier, even as leading stable coin Tether gained $4 billion.
Market participants said that some USDC withdrawals were likely to be reinvested inbitcoin, which helped fuel the rally.
It's too soon to say thatbitcoin is an alternative in a banking crisis, cautioned Ed Hindi, Chief Investment Officer at Tyr Capital in Geneva.
He said that the rally we are witnessing in bitcoins will be looked back at as the point in time when its main property will be tested as a decentralized non-sovereign asset.