CRYPTOCURRENCIES it slid towards the end of the trading day on Wednesday, erasing losses from an earlier rally.
Bitcoin it ended the day higher by less than 1% at $27,580.88, according to Coin Metrics. Ether it fell about 1% to $1,835.88.
Earlier in the day, bitcoin jumped as much as 8% and briefly recaptured the $30,000 level. That helped buoy ether, which advanced more than 6% at one point to around $1,950.
bitcoin had been trading sideways for several days, with volatility returns to its lows of early March, before the banking crisis began and became one of the biggest catalysts for the rise of the cryptocurrency this year. As of Tuesday night, issues at First Republic helped drive cryptocurrency price action back up, according to Matt Hougan, chief investment officer at Bitwise Asset Management.
โCryptocurrencies rally during banking crises and it looks like the banking crisis is not over,โ Hougan said.
First Republic shares fell nearly 30% on Wednesday, taking its two-day loss to around 80%, after reporting a massive drop in deposits in the first quarter as customers withdrew their money following the collapse of Silicon Valley Bank. CNBC's David Faber reported that the next few days are crucial for the company, as other banks and federal officials seek draw up a rescue plan.
Bitcoin (BTC) this year
Bitcoin rose 22% in March like the crisis between the regional banks of the USA. opened the eyes of investors to its possible uses as a hedge against uncertainty and as an alternative banking system.
"Bitcoin continues to oscillate between being the last lifeboat in today's banking system and the top risk asset," said managing partner James Lavish at Bitcoin Opportunity Fund. "As the First Republic is now on the brink of collapse, bitcoin represents a safe haven from uncertain bank deposits."
Bitcoin's 30-day rolling correlation with gold has been rising since March and now stands at 57%, its highest level in almost two years, according to crypto data provider Kaiko. Its correlation with the S&P 500 fell further in April to just 7%.
Fed concerns on the horizon
While last week's pullback did not undo the year-to-date uptrend, uncertainty still looms over cryptocurrencies.
Traders are watching the latest decision from the Federal Reserve on whether and when to stop raising interest rates to combat high inflation and some direction to start cutting rates. The central bank's next policy meeting will take place next week, and the latest reading of its preferred inflation gauge, personal consumption spending, is due later this week.
"The crypto market learned last month that the banking crisis works favorably for the bitcoin price, but we need to approach it from multiple angles," said Yuya Hasegawa, a crypto market analyst at Japanese crypto exchange Bitbank. "The Fed Funds futures market is pricing in the start of rate cuts later this year, and could be a source of disappointment if the Fed continues to refrain from comment or even deny the possibility of rate cuts this year."
Crypto remains in its year-to-date uptrend. Its resistance level between $28,800 and $29,000 could be a "hard ceiling to break" until Friday's PCE announcement, he added.
โCNBC's Gina Francolla contributed reporting
