The mysterious digital currency Bitcoin is once more in focus as the US banking system struggles with growing stress. Driven by economic problems, some estimate a stratospheric increase to $1 million per coin; others remain dubious.
Banking On Bitcoin’s Rise?
Advocates of bitcoin see it as a lighthouse of consistency amid a tempest. Bitcoin has a limited supply and distributed character unlike conventional assets connected to the state and institutions. This, they contend, puts it exactly in position to profit from a “flight to safety” situation in which investors flee a possibly failing financial system.
The current past seems to confirm this story. The collapses of well-known establishments like Silicon Valley Bank in March 2023 coincided with a 40% increase in the price of Bitcoin in a one-week period Industry figures point to this as proof of Bitcoin’s function as a “uncorrelated asset class,” a defence against conventional financial turbulence.
The most recent assessment by the Federal Deposit Insurance Corporation (FDIC) strengthens this case even more. The study presents a disturbing picture, stressing an alarming tendency of unrealised losses on securities kept by US institutions.
Driven by increasing rates, these losses have soared to around $500 billion. Furthermore, in only one quarter the count of banks on the FDIC’s “Problem Bank List” has changed from 52 to 63, which causes concerns regarding the general state of the industry.
Million-Dollar Dream Or Flight Of Fancy?
Although Bitcoin’s value potential is clear-cut, the ambitious $1 million price target runs into great challenges. Such a significant increase could lead to a full-fledged economic crisis, which would not always help Bitcoin over the long haul, experts caution.
Moreover, the historical link of Bitcoin with other assets is not fixed. Although weak correlation periods abound, there have also been cases of substantial correlation, especially in more general market declines. This questions whether Bitcoin can entirely separate itself from a faltering conventional banking system.
Another element to take into account is the recent increase in the M2 money supply, a statistic gauging the whole amount of money in the economy. Past times of M2 expansion have matched rises in Bitcoin prices. Still up for debate, though, is how Bitcoin interacts with money supply in an environment with maybe unstable financial systems.
The Road Ahead For Bitcoin
Featured image from Pngtree, chart from TradingView