Bitcoin is not detached from the traditional banking system
Amid the global shock caused by the Silicon Valley Bank collapse, this could be bitcoin’s time to shine, Morgan Stanley strategic analysts believe.
“Bitcoin was created as a way for anyone to hold value in a private digital wallet without needing an intermediary bank to hold value for them or facilitate transactions,” the strategic analysts wrote in a note, according to Investing.com.
Opportunities and… pitfalls
However, they cautioned that the price showed that Bitcoin is not detached from traditional banking.
“Our conclusion is that the Bitcoin network can operate without banks, but the price of Bitcoin, and therefore its purchasing power, has been and continues to be affected by fiat central bank policy and needs banks to facilitate flows to the cryptocurrency,” they explain.
“If bitcoin had traded on the basis of its core value proposition – the ability to ‘be your own bank’ – then bitcoin would have rallied with the increasing uncertainty of banks.”
They also argue that the ongoing rally in bitcoin is likely the result of a “short squeeze rather than a fundamental change in trading dynamics.”
Finally, the strategists addressed the question that has been discussed by some in crypto circles in recent days – will US dollar deposit holders convert to bitcoin due to uncertainty related to their deposit bank?
“Some possibly will, but we think it’s too early to say that this is a long-term trend.”
Bitcoin generally continues to trade in line with the increase in the supply of plastic money (M2).
Without bitcoin being used significantly as a payment instrument, it will be difficult for the most popular digital currency to deviate from its nature as a risk asset for trading,” the strategic analysts concluded.
The rally continues
Meanwhile, the rally in prices continues, with bitcoin gaining nearly 12% to $24,776 at its highest levels in three weeks, erasing the weekend’s losses.
At the same time, Ethereum is up 6.6% at $1,690.
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