- Bank of America and Fidelity Management recently purchased more than $85 million of MicroStrategy’s MSTR shares
- According to analysts, inflation is still running high, which could worsen economic conditions by mid-2023.
- Bitcoin’s dominance has been restored in the past few days, which could be bullish for its price.
Bitcoin is expected to benefit from the recent bank failures, but the impact is not only visible to the average Joe, but to the banks as well. The collapse of Silicon Valley Bank, Signature Bank, and Silvergate Bank, along with improving economic conditions, could act as potential triggers for increased confidence in crypto assets.
Bank Reliance on Bitcoin and Cryptocurrencies
In an interesting development, facilitators of fiat currencies have shifted their faith to digital currencies. In view of this, banks have been indirectly stocking up on Bitcoin over the past few months as analysts see the US economy as doomed.
Recent reports highlighted that Bank of America (BOA) and Fidelity Management bought more than $85 million worth of MicroStrategy’s MSTR shares in the first quarter of this year. Michael Saylor’s tech company is an avid hoarder of BTC and in the past two years, has acquired 140,000 BTC worth $4.1 billion.
The company is tied to Bitcoin, and its CEO, Saylor, has hinted that the cryptocurrency’s rising value over time will justify its recent decisions. However, BoA and Fidelity are some that give credence to these claims. Other banks, including Morgan Stanley and State Street Corp., are also heavily bullish on BTC. Together, these banks hold $93 million worth of shares in MicroStrategy
While many banks have criticized cryptocurrencies, Bank of America says bitcoin acts as a safe haven like gold. Calling it an inflation hedge due to its fixed supply, BoA considers it a safe investment amid an uncertain macro environment.
The bank’s global research team, in a recent report, also said,
“Digital currency seems inevitable. We see distributed ledgers and digital currencies, such as CBDCs and stablecoins, as a natural evolution of today’s financial and payment systems.”
Bitcoin investment can work as economic conditions worsen
Over the past few months, the Consumer Price Index (CPI), aka the inflation rate, has been a concern. Despite the inflation rate set to ease to 5.2% annually for March 2023, it is still above the Federal Reserve’s target rate. If inflation still runs high, spending power can bear a significant impact.
A recession is expected in mid-2023 as a result of the deteriorating economy. The Conference Board said in its economic forecast last month,
“We continue to forecast that the US economy will slip into recession in 2023 and that GDP growth will contract for three consecutive quarters beginning in Q2 2023. Our annual forecast for 2024.”
Further, making the case for Bitcoin is the growing dominance of the digital asset in the crypto market. Although BTC dominance was expected to decline, it has recovered over the past few days and is currently holding firm at 47.78%. It could also kill the possibility of an alt season, which is good for BTC.
Bitcoin dominates
Hence, banks’ inflation hedges may be in their favor if the above conditions are met, potentially increasing investor confidence in the crypto market.