The recent news that First Republic Bank faced the risk of collapse resonated in the cryptocurrency market as well. Bitcoin price experienced a sudden spike of nearly 10%, leading many to consider the two events as being correlated. Nic Carter, general partner at Castle Island Ventures and board chair at Coin Metrics, found this remarkable phenomenon in his decade long experience in the crypto industry.

Due to the current market conditions of low liquidity, it does not take much trading to cause significant price swings. With the growth of retail trading, taking advantage of the situation is much easier as well. Jason Yanowitz and Santiago Roel Santos, from the Empire podcast, discussed the relationship between the bank collapse and the volatility of bitcoin.

The US government mentioned that they will not step in to help the ailing bank, but stated “not currently”, suggesting that the situation might have to deteriorate even further before assistance may be provided. In the same sense, other banks or private equity firms may be looking to optimize the situation and provide a lifeline to First Republic Bank just before it enters into total receivership.

Looking at these conditions, both liquidity and speculators, Nic Carter suggested that this is not necessarily an “long bitcoin short the banks” narrative, but betrays a notion of declining liquidity in the market due to the role of the Fed. With FIAT currencies experiencing considerable drops, more and more investors look to alternative options and bitcoin becomes their go-to choice. What we are experiencing at the moment is a pump and dump concept, with bitcoin further out on the risk spectrum, thus being affected the most.



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