Bitcoin (BTC) edged below $27,000 as the latest banking debacle failed to trigger the sort of price surge that has occurred in recent weeks amid multiple U.S. bank failures.
The largest cryptocurrency by market capitalization was recently trading at around $26,950, down over 3% in the past 24 hours. BTC had been hovering above $27,000 Thursday morning before dropping below the threshold around 1 p.m. ET. BTC has been trending downward for much of the past week as investors look for a new price catalyst. Bitcoin fell below $27,000 on Wednesday for the first time since March, regained the threshold before falling again.
Bitcoin price chart showed that the cryptocurrency’s price dropped below $27,000 on Thursday afternoon. (CoinDesk)
In an email to CoinDesk, Vineeth Bhuvanagiri, the managing director of Emurgo Fintech, the founding entity of the Cardano blockchain, noted that investors remain concerned about low liquidity, which is why “seemingly slight selloffs tend to have an outsize impact on price.”
Meanwhile, an outflow of deposits at PacWest Bancorp (PACW) that sent the Los Angeles-based bank’s stock price down 22% on Thursday did not spur “strong demand for cryptos as this time, Edward Moya, senior market analyst for foreign exchange Oanda, wrote in a Thursday note.
“Banking contagion fears still remain low as some banks like Western Alliance show deposits are rising,” Moya said.
Emurgo’s Bhuvanagir suggested that a major macro shock such as “a lack of resolution on the debt ceiling that triggers a default” could send bitcoin’s price reeling, although he added that BTC appears to be “in an accumulation phase, meaning that “dips get gobbled up quickly.”
In an interview with CoinDesk, Greg Cipolaro, global head of research at bitcoin-focused investment firm NYDIG, compared the market’s tenor to that during the debt ceiling crisis of 2011, “sensing a little bit of the same,” Cipolaro said.
“It’s a little bit of calm before the storm right now,” he said. “As we get into the negotiations in the end, the ceiling will ultimately be raised. There may be quite a bit of market volatility around that.”
“It might be that bitcoin, as a non-sovereign issued store of value, is seen as a valid investment option for those seeking to insulate themselves from the machinations of politicians and monetary policy setters,” he wrote in a note published on April 21.
Ether (ETH), the second-largest cryptocurrency by market capitalization, followed a similar trend, dropping over 3.5% to hover around $1,788 Thursday. ETH dropped below $1,800 for the first time since late April, according to CoinDesk data. Layer 2 blockchain Polygon’s MATIC token slid over 4% to trade at around $.84 cents.
The CoinDesk Market Index (CMI), which measures the overall crypto market’s performance, was down 3.7% for the day.
Equity markets were mixed, with the S&P 500 and Dow Jones Industrial Average (DJIA) dropping by 0.1% and 0.6%, respectively. The tech-heavy Nasdaq was up 0.1% for the day.
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CORRECTION (May 11, 2023, 21:10 UTC): Bitcoin fell below $27,000 for the first time since March on Wednesday.
