Bitcoin jumps to 9-month high as bank turmoil triggers rally

The largest crypto currency increased $28,567, its highest since mid-June, and was last up 0.9 per cent, amid growing expectations that central banks would slow the pace of interest rate hikes

Bitcoin jumped to a nine-month high on Monday as turmoil in the banking sector drives some investors to turn to digital assets, as the crypto currency built on its best week in four years.

The largest crypto currency increased as much as $28,567, its highest since mid-June, and was last up 0.9 per cent, amid growing expectations that central banks would slow the pace of interest rate hikes.

Bitcoin increased 26 per cent last week, its best weekly gain since April 2019, and has surged nearly 40 per cent in 10 days as turmoil in the banking sector rippled around the world – resulting, so far, in UBS Group’s acquisition of rival Credit Suisse Group AG over the weekend.

Conventional assets like banking stocks and bonds plunged on Monday after UBS completed its state-backed takeover of Credit Suisse, a deal arranged in an effort to restore confidence in a battered sector.

Top central banks, faced with the possibility of a fast-moving loss of confidence in the stability of the financial system, moved on Sunday to strengthen the flow of cash around the world. Such a global reaction has not seen since the height of the COVID-19 pandemic.

Its extraordinary rally is the outcome of the banking crisis, and as the interest rate markets price in rate cuts in the second half of this year, according to Tony Sycamore, an analyst at IG Markets, forecasting a move towards $32,000 should bitcoin hold above the key support level of around $25,000.

Other market players forecasted that bitcoin would benefit from central bank attempts to strengthen liquidity in the global financial system. It increased to a record $69,000 in November last year after central banks and governments launched unparalleled monetary and fiscal stimulus measures.

The impetus is all driven by liquidity, according to Markus Thielson at digital asset firm Matrixport in Singapore.