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- Cryptocurrencies, particularly bitcoin, rallied as Moody’s downgraded 10 US banks and shut down others, creating an environment of uncertainty in the banking sector.
- This has led to a growing sense that Bitcoin could act as a safe haven during times of banking turmoil, reflected in the decoupling of its correlation from the stock market.
With excitement in the air, CNBC reported that cryptocurrencies surged Tuesday after Moody’s downgraded the ratings of ten US banks, putting Bitcoin in the spotlight as a potential safe haven asset.
A turning point in the banking sector
Early Tuesday morning, Moody’s downgraded the ratings of some major names including Bank of New York Mellon, US Bancorp, State Street and Northern Trust and put them on downgrade watch. This action reignited investor interest in Bitcoin, leading to a 2.89% surge to $29,785.88, according to Coin Metrics.
US Banking Crisis: A Growing Concern
Moody’s actions go well beyond these ten banks. The rating agency changed the outlook for 11 banks to negative from stable and put six banking giants up for potential downgrades, including names like Webster Financial Corporation, Fulton Financial Corporation and Pinnacle Financial Partners.
In addition, Moody’s commented on the growing pressure on profitability and forecast a slight recession in the USA in early 2024. Asset quality is likely to decline, with some banks’ commercial property portfolios presenting particular risks that may impact investment in today’s high-yield markets. tariff environment.
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Bitcoin as a beneficiary of the banking turmoil
Earlier in the year, a crisis among US banks sparked a major surge in bitcoin, prompting speculation that the cryptocurrency could serve as an alternative to traditional banking systems. This belief finds renewed resonance, as Greg Magadini, Director of Derivatives at Amberdata, explained:
“Bitcoin is holding up strong. The correlation between the stock market and bitcoin is decoupling as bitcoin has proven to be a beneficiary of the banking turmoil.”
Persistent Risks: A Catalyst for Bitcoin?
The triggers of the banking crisis earlier this year remain, leaving banks at risk of outflows. These uncertainties, coupled with Moody’s recent downgrades and warnings, have caused US stock markets to fall. In contrast, Bitcoin’s value is rising, marking a notable decoupling from traditional market trends and fueling speculation that Bitcoin may actually be viewed as a safe haven amid banking instability.
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