Bitcoin, which has been reluctant to surpass the key threshold of $30,000 for a long time, has gained more than 70% since the beginning of the year, making it the best-performing major asset in the world.
In a note published Thursday, analysts at Bernstein noted that the latest bitcoin rally in recent weeks was related to the banking crisis in the United States, which has shed new light on bitcoin's potential as an alternative financial system, conjuring up the next cryptocurrency revolution.
Remember, Bitcoin was born in the aftermath of the 2008 financial crisis, as a decentralized digital currency that does not depend on banks or any other trusted third party.
However, soon after its appearance, many holders began to compare it to gold due to its low correlation with other assets, which apparently made it useful as a store of value and a hedge against probability (or uncertainty). Lately, Bitcoin has been more correlated with US technology stocks.
However, analysts estimated that the banking crisis caused a new paradigm shift for Bitcoin, which is once again seen as a digital version of the yellow metal according to them.
Analysts at Bernstein write that the spread between Treasury rates and bank deposit rates will continue to widen for banks, as weak balance sheets lead to another wave of exodus into the money markets.
Analysts went on to explain that, to save the ship, the Fed will have to resort to devaluing the dollar and printing money, which will restore bitcoin to its role as digital gold.
What will happen now, in our view, is a new crypto cycle, driven by an exodus to self-wallets used as savings accounts and representing a sudden explosion of financial innovation in blockchains, Bernstein analysts said.
Thus, analysts believe that the rise of bitcoin and other digital assets in the face of the banking crisis could be just the beginning.
Analysts at Bernstein said: As the second-order effects of drawdowns (credit freezes, margin pressures, asset quality issues) continue, we expect the banking sector to start exposing cracks in the sector, prompting the Fed to downgrade the dollar earlier.
Analysts also predict that the pressures on traditional banks will cause customers to adopt core principles of cryptocurrency, such as self-ownership and transparency, into their private banking experiences, believing that the idea that one can go private bank will soon become commonplace.
The safe-haven reference will lead to a new crypto cycle, driving digital wallets to become on-chain savings accounts, analysts said, noting that each cycle pushes forward the adoption curve of cryptocurrencies - coins through major innovation and wider adoption.
Finally, the analysts at Bernstein concluded by saying that 2023 will be the year of significant expansion, growth of self-managed portfolios, and adoption of DeFi by individuals and institutional participants.
