Barring momentary blips, cryptocurrencies, particularly Bitcoin, is witnessing one of its best runs in recent history. What makes this run of form sweeter is the fact that it comes at a time when traditional finance is continuing to struggle with all sorts of issues.
The desperate attempts by the federal reserve to contain inflation with an unending run of interest rate increases by the federal reserve, is further compounded by the recent (ongoing?) bank crises.
Is this the tipping point for Bitcoin, and cryptos in general?
According to analysts at Bitfinex, the weekly Bitcoin spot trading volume recorded its highest ever reading last week, as the 7-day moving average of Bitcoin trading volumes on exchanges rose to around $24 billion.
Read More: BTC soars to 28k on Fed’s $300 bn injection into US banks
The positive moves were matched on the derivatives market that saw the trading volume of Bitcoin futures across various exchanges come close to $1 trillion, while Bitcoin options open interest rose to $12.14 billion.
According to analysts at Bitfinex, these moves not only suggest that institutional investors are increasingly participating in the market, but could also be indicative of the early stages of a bull market.
Cracks in centralized finance
Samuel M Cohen, Head of Business Development at Foreman Mining believes the recent banking crisis has once again highlighted the fragility of centralized financial institutions, particularly flagging its fractional reserve banking as a key factor in the problem.
Under fractional reserve banking, Cohen explains, banks are only required to hold a fraction of their customers’ deposits as reserves, while the rest can be loaned out or invested. While risky lending practices and inadequate risk management played a role in the recent banking crisis, these issues were exacerbated by the fractional reserve banking system.
When too many customers tried to withdraw their funds at once, banks were unable to meet the demand, leading to a collapse of confidence in the banking system. Cohen believes this is where Bitcoin can shine and present itself as a potential solution.
Read More: The opportunity for cryptos in the wake of the banking collapse
As we all know, cryptos like Bitcoin operate on a decentralized ledger system that is not subject to the same risks and vulnerabilities as traditional banks. “By eliminating the need for intermediaries like banks, Bitcoin provides users with greater control over their financial assets and reduces the risk of systemic financial crises caused by fractional reserve banking,” asserts Cohen.
Future Positive
The prevailing conditions bode well for the market.
Gazing at his crystal ball Cohen says it’s likely that we’ll see continued debate and discussion around the role of fractional reserve banking in the financial industry, as well as the potential benefits and risks of Bitcoin and other cryptocurrencies.
“As governments and regulators seek to promote stability and prevent financial crises, it’s important that they carefully consider the potential implications of different financial systems and work to strike a balance between innovation and regulation,” suggests Cohen.
Commenting on the current market conditions, Bitfinex analysts tell Economy Middle East that the BTC Long-Term Holder (LTH) Spent Output Profit Ratio (SOPR) is now returning to a level greater than one, on multiple timeframes. This indicates that the crypto is being moved at a profit.
Furthermore, the analysts share that long-term Bitcoin holders selling their coins during current market conditions is consistent with previous bear market trends, which is a positive signal for the market.
Read More: Binance’s CZ reacts to CFTC complaint
While inconveniences like the recent US action on Binance could slow down the positive moves by the crypto markets, they’ll continue to have an upper hand over traditional finance, which continues to be on a steady downward spiral.
Disclaimer: This article is based on publicly available information and should not, in any way, be considered financial advice.
