Bitcoin’s price rose above $95,000, driven by optimism over US-China trade talks and Trump’s support for Federal Reserve Chairman Powell. Banks are facing $482 billion in unrealized losses on long-term bonds, potentially aiding Bitcoin’s status as a safe-haven asset. Analysts believe rising risks might bolster Bitcoin’s appeal, allowing for a further price increase to $100,000 and potentially targeting $122,000 soon.
On Monday, Bitcoin surged above $95,000, marking its highest point since late February. This recent uptick has been attributed to growing optimism related to a potential trade agreement between the United States and China. Additionally, the cryptocurrency and altcoins saw significant gains after Donald Trump suggested he’s not considering the removal of Jerome Powell, the Chairman of the Federal Reserve, amid recent volatility in the bond market.
Another significant factor potentially influencing Bitcoin’s upward trajectory is the alarming $482 billion in unrealized losses held by U.S. banks. These losses primarily arise from long-term Treasury bonds acquired during a period of historically low-interest rates. As interest rates have jumped from nearly zero during the pandemic to over 4% now, the value of these securities has declined, making their yields less appealing compared to newly issued bonds.
Take, for instance, a ten-year government bond issued in 2020 with yields close to zero; currently, similar bonds yield between 4% and 5%. Major banks like Bank of America, JPMorgan Chase, and Wells Fargo are among those heavily impacted by these unrealized losses. The crux of the problem? Selling these bonds means accepting large financial losses, a move that could harm their stock prices.
Complicating matters, Trump’s demands for the Federal Reserve to lower interest rates clash with the risk of fueling inflation. This precarious situation raises concerns that banks could face catastrophic outcomes reminiscent of the First Republic Bank collapse in 2023 due to substantial unrealized losses.
Some analysts believe that if these banking risks materialize, Bitcoin could gain traction as a safe-haven asset. One analyst noted that this evolving situation strengthens Bitcoin’s position not merely as an inflation hedge but as a “collateral of last resort,” especially as confidence in traditional collateral wanes.
From a technical perspective, Bitcoin’s recent performance shows a positive trend. The 3-day chart indicates that the cryptocurrency bounced back successfully. It also recently broke past the crucial $88,666 resistance level, the neckline of a double-bottom formation evident earlier this month.
Additionally, Bitcoin remains above $73,805, the upper limit of a cup and handle structure, and is trading above both the 50-day and 100-day Exponential Moving Averages, indicating bulls are currently in charge. If these trends continue, Bitcoin could aim for $100,000, and potentially even reach its historical peak of $109,300, followed by a target of $122,000 related to the defined cup and handle structure.
