2023-04-26 15:03:54
Bitcoin (BTC) has jumped more than 5% in the past 24 hours after shares of First Republic Bank (FRC) closed the trading day down more than 50% on April 25 following fears of another possible impending bank failure. they whipped up the mood.
The price of bitcoin immediately began to rise after Fox News Business reporter Charles Gasperino broke the news that bankers working with First Republic Bank expect the institution to go into bankruptcy and be taken over by the authorities.
Bankruptcy supervision is a tactic that allows creditors to recover funds from potentially insolvent companies and helps distressed companies avoid bankruptcy.
According to crypto analytics firm Santiment, the correlation between bitcoin and the S&P 500 may be declining as the narrative that bitcoin is a safe haven has begun to gain momentum again amid the banking crisis.
First Republic Bank said it was in trouble
First Republic Bank first reported its financial problems to regulators in early March. Then 11 of the largest banking institutions in the United States, including JP Morgan and Bank of America, deposited $30 billion with the troubled bank.
On March 26, Bloomberg reported on it reportedthat the US authorities are considering the creation of an emergency credit facility to help the bank overcome “structural challenges” related to its balance sheet.
According to unnamed sources at the time, despite First Republic’s liquidity problems, US officials said the bank’s deposits would be fine and that they were not in danger of an “immediately severe bank run” like the one that led to the collapse of Silicon Valley Bank.
Unfortunately, these comforting statements turned out to be wrong.
On Monday, April 24, after publishing its first-quarter results, First Republic reported that its total deposits fell by more than $100 billion and that it will seek “strategic opportunities” to strengthen its financial position as soon as possible.
Although the bank has yet to clarify what exactly these strategic options are, the stock market report highlighted that the troubled company plans to reduce its total assets and reduce expenses. They are trying to achieve this by cutting executive salaries, slimming office leases and laying off an expected 20-25% of employees in the second quarter.
The banking crisis has already taken a heavy toll on American financial institutions this year. On March 8, Silvergate Bank announced it was closing its doors after a massive rush by customers to withdraw their deposits. Two days later, Silicon Valley Investment Bank was shut down by California’s financial regulator.
Despite the turmoil, US Treasury Secretary Janet Yellen reiterated that the US banking sector remains strong and stable. “Our banking system continues to have solid, strong capital and liquidity positions,” Yellen said at the April 21 meeting of the Financial Stability Oversight Board.
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