The immediate aftermath of the falls of Silicon Valley Bank (NYSE: SVB) and SVB Financial (NYSE: SIVB), among other financial institutions, was viewed in some circles as a potential death knell for the cryptocurrency universe.
It’s proven to be anything but, as bitcoin is higher by 10.70% over the past seven days as of midday Tuesday. The largest cryptocurrency by market value and its brethren still have a long way to go before being considered safe haven assets, but some market observers believe that designation is possible, as rocky times in the banking sector could prompt investors to embrace alternative assets and currencies there are not fiat.
As deVere Group CEO Nigel Green pointed out, it’s hard to ignore bitcoin’s rally against the backdrop of the worst banking crisis since 2008.
“It’s acting as a safe haven asset as the collapse of tech-focused Silicon Valley Bank sparks fears across Wall Street of contagion in the banking system which many say was being crippled by a relentless agenda of interest rate rises,” he wrote.
Also relevant to his claim that bitcoin could be a preferred alternative asset class for investors over the near term is the point that fallout from the collapses of Silicon Valley Bank and others led to a $465 billion market capitalization haircut in just two days for global financial services stocks.
In some cases, market participants were right to bail on select bank stocks, but not all members of the group have significant crypto exposure, and many offer quality traits, indicating that a market cap bloodletting of that magnitude may have been too severe. That thesis could eventually prove accurate, but the point is that banks are contending with near-term headwinds.
“This isn’t the first time that Bitcoin has shown some characteristics of a safe haven asset during times of economic uncertainty. During the pandemic in 2020, Bitcoin saw a surge in demand as investors sought alternative assets to protect their wealth from the economic fallout,” according to Green.
As for bitcoin’s status as an alternative to traditional fiat currencies, that’s all the more relevant at time when national debts are ballooning throughout the developed world. Specific to the U.S. dollar, profligate spending and lax fiscal policy could be dollar-destructive, and that could be beneficial to bitcoin over the long term.
“Investors are therefore looking for alternative currencies, such as cryptocurrencies. Moving forward, these will increasingly compete with traditional, fiat ones and this will help trigger the decreasing dominance of currently leading international currencies,” concluded Green.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.