Cryptocurrency Market Set for More Upside After Bank Problems: Bernstein

The current environment is the perfect setting for the decentralized-financial system to stand out as an alternative to traditional banking, a report from the firm said.

AccessTimeIconMar 20, 2023 at 12:15 p.m. UTC
Updated Mar 20, 2023 at 10:08 p.m. UTC

Financial markets have been shaken in the past week following a series of bank collapses, providing a perfect setting for the decentralized-financial system to stand out as an alternative and for a continued advance in cryptocurrency markets, Bernstein said in a research report Saturday.

First Republic Bank’s (FRC) deposit rescue package by multiple institutions should make it obvious that this is a “generic banking problem” and crypto isn't to blame, the report said, noting that initial reactions to the collapse of of Silvergate Bank, Silicon Valley Bank and Signature Bank were that those banks held deposits from the crypto world and therefore their problems were idiosyncratic.

“This is the perfect setting for bitcoin, ethereum and the rest of the decentralized-financial system to stand out as an alternative system, delinked from the traditional centralized banking system,” analysts Gautam Chhugani and Manas Agrawal wrote.

Bernstein says institutional funds and crypto funds have been bystanders in the market, with “crypto native money” behind the recent price moves. As more outside money is forced to participate, the moves higher should become sharper.

The banking on-ramp to crypto may be weaker in the U.S, but continues to be stable internationally, with access through over-the-counter hubs in Asia and Europe, the note said. OTC trading is done directly between two parties without the supervision of an exchange.

OTC hubs in the U.S. also seem to be working without interruption, the note added.


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Will Canny is CoinDesk's finance reporter.

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