Cryptocurrency Bitcoin has reached a 10-month high following the worst banking turmoil since the 2008 global financial crash and is now worth more than $30,000.
One Bitcoin was worth $30,438 in Asian trading on Tuesday, a high not seen since June last year – but still less than half the all-time high value of more than $67,000 in November 2021.
The value of the major cryptocurrency has recovered from the hits it took late last year as one of the world’s largest cryptocurrency exchanges, FTX, went bankrupt and its founder Sam Bankman-Fried was charged with fraud.
The leading cryptocurrency had been steadily increasing in value since March and tipped the $30,000 threshold amid expectations the US central bank, known as the Fed, will halt its interest rates increases, thereby maintaining borrowing costs as opposed to making lending more expensive.
The Fed had been increasing interest rates in an effort to bring stubbornly high inflation down.
However, market expectations now are that the Fed is unlikely to raise interest rates much higher for longer as it seeks to minimise stress on the banking sector.
More than a quarter of economic forecasters (28.6%) expect there will be no increase in the US interest rate next month, while the remaining 71.4% predict a 0.25 percentage points rise.
High interest rates posed problems for banks and was one of the factors behind the collapse of Silicon Valley Bank and the associated worst banking turmoil since the 2008 global financial crash. US lenders Signature Bank and Silvergate Bank collapsed, and Switzerland’s second largest lender Credit Suisse were forcibly taken over by Swiss rival UBS.
However, high interest rates also help banks’ profitability. NatWest, for example, had profits boosted to the highest level since before the global financial crash as money earned on loans, minus the amount it pays in interest, increased.
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Bitcoin value had been rising since the FTX collapse but particularly gained strength over March following the collapse of three US banks.
The turmoil gave new credence to the belief among Bitcoin fans that cryptocurrency is a more attractive alternative to traditional finance.