Bitcoin market gains $26 billion after hitting 9-month high as banking crisis sparks rally
Bitcoin jumped on Monday as some investors turned to digital currencies amid a crisis in the traditional banking sector.
Bitcoin was up 5% at $28,378.35 at around 5:20 a.m. ET, according to CoinDesk. Earlier in the day, bitcoin hit $28,554.07, it's highest level in nine months.
In the 24 hours to 5 a.m. ET Monday, the value of all the bitcoin in circulation gained around $26 billion.
The rally in bitcoin comes amid turmoil in the global banking sector which was sparked by the collapse of Silicon Valley Bank in the U.S. While American regulators stepped in to backstop deposits at SVB, concerns continued to mount about fragilities at regional banks in the U.S. and elsewhere.
In Europe, embattled Swiss bank Credit Suisse was in focus after the SVB failure and after its biggest backer, Saudi National Bank, said it could not provide further financial assistance to the lender due to regulatory restrictions.
On Sunday, UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.2 billion) in a deal partly brokered by the Swiss regulators looking to stem contagion across the global banking sector.
Advocates of bitcoin have often dubbed it "digital gold" referring to it as a store of value, particularly in moments of global turmoil, and one that is uncorrelated with other asset classes. However, bitcoin has more often than not traded in line with equities, and in particular the tech-heavy Nasdaq.
But there are signs bitcoin's price movement is beginning to decouple from stocks, for now.
"If one looks at the history of Bitcoin and why it was created in the first place, it was precisely for events like this where the current system shows signs of weakness and hence owning an uncorrelated asset helps," Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
"Over the years, this argument of Bitcoin being an uncorrelated asset class has been debated quite a bit, but we are now potentially seeing that viewpoint being vindicated in a lot of ways."
While gold is up around 9% this year, bitcoin has surged more than 70%.
Interestingly, other cryptocurrencies on Monday did not see the same jump as in bitcoin. Ether was trading roughly flat. Other cryptocurrencies are not seen as "digital gold" by proponents in the same way that bitcoin is.
"As this banking crisis plays out, it'll be interesting to continue to watch Bitcoin price action as more and more people think of owning Bitcoin as a clever alternate to the current system," Ayyar said.