Bitcoin Surges First Republic Bank – After First Republic Bank (FRC) shares dropped more than 50% on April 25, concerns over a potential impending bank failure caused the price of Bitcoin (BTC) to jump more than 3% in the previous day.
The head of research at Australian crypto education platform Collective Shift claims that the moment Fox News Business reporter Charles Gasperino broke the news that bankers at First Republic Bank anticipate the institution entering government receivership, the price of Bitcoin spiked.
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See Tweet Below:
Price was $27,500 at the time of the tweet and is now $28,150. pic.twitter.com/aSjzFXiip6
— Matt Willemsen (@matt_willemsen) April 25, 2023
Receivership is a strategy that helps distressed businesses avoid bankruptcy while allowing creditors to recover money that may be at risk of default.
The association between Bitcoin and the S&P 500 may be eroding, according to data from crypto analytics company Sentiment, as the concept that Bitcoin is a safe haven during the banking crisis has once again gained traction.
See Tweet Below:
🚀 Just minutes after US stock markets winded down their rough day, #crypto has had signs of life. With $BTC pushing for $28.5k & $ETH closing in on $1,900, these surges without reliance on the #SP500 are ideal for the market's independent sustainability. https://t.co/0XeNVf9Vaz pic.twitter.com/KeJ1408UiN
— Santiment (@santimentfeed) April 25, 2023
How It Happened
Early in March, First Republic started having problems. As a result, 30 billion dollars were deposited at the struggling bank by 11 of the biggest American banks, including J.P. Morgan and Bank of America Corp.
According to Bloomberg, American regulators were considering setting up an emergency loan facility to help the bank shore up the “structural challenges” with its balance sheet, which were first disclosed on March 26.
The bank’s deposits were “stabilizing,” according to unnamed U.S. officials at the time, and they said it was not in danger of experiencing “the kind of sudden, severe run” that prompted regulators to close down Silicon Valley Bank. This was said to be the case even though the First Republic was facing serious liquidity issues.
These claims, sadly, turned out to be false.
In its first-quarter earnings call on April 23, First Republic stated that total deposits had fallen by more than $100 billion and that it will be “pursuing strategic options” to immediately improve its financial situation.
The earnings report stated that the troubled company plans to shrink its balance sheet and reduce expenses by slashing executive salaries, reducing office leases, and firing 20% to 25% of its workforce in Q2. The bank has not yet specified exactly what these strategic options entail.
Financial institutions in the United States have suffered greatly as a result of the banking crisis this year. Following a run on deposits, Silvergate Bank announced on March 8 that it would be closed.
The California Department of Financial Protection shut down Silicon Valley Investment Bank two days later.
U.S. Treasury Secretary Janet Yellen has reaffirmed that despite the unrest, the American financial industry is strong and stable. “Our banking system remains sound, with strong capital and liquidity positions,” Yellen said at the Financial Stability Oversight Council meeting on April 21.