Another US Major Bank, First Republic, On The Brink Of Collapse

26 Apr 2023

Mitchell Nixon

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The shares of another significant US bank have plummeted by 50% amid reports of customers withdrawing almost $150 billion in deposits, fuelling concerns of a possible collapse.

On Tuesday, there was a sharp decline in Wall Street stocks due to First Republic Bank’s shares being heavily impacted by an earnings report that revealed a substantial loss of deposits, raising concerns about the overall health of the financial sector.

Following the failures of Silicon Valley Bank and Signature Bank last month, which caused fears of contagion, investors have been closely monitoring the performance of regional lenders.

We did an article on Silicon Valley Bank here.

And an article on Signature Bank here

Both articles discuss the importance of holding Bitcoin under these conditions. 

As of Wednesday (AEDT), First Republic shares sank nearly 50 per cent:

The Dow Jones Industrial Average dropped by 1.0%, closing at 33,530.83, while the S&P 500, a broader market index, experienced a 1.6% decline, closing at 4,071.63.

The Nasdaq Composite Index, which is composed of mostly technology-related stocks, saw a significant decline of 2.0%, closing at 11,799.16.

Despite First Republic Bank’s quarterly profits of $269 million, its deposit level of $104.5 billion at the end of March overshadowed the positive earnings report. This marked a nearly $72 billion drop from the previous year-end deposit level.

The sharp decline in shares on Tuesday resulted in First Republic Bank losing over 90% of its value since the beginning of March.

In addition to its significant loss in value, First Republic Bank also announced on Monday that it plans to reduce its staff by 20-25%.

As mentioned, over the past several months, traditional banks have faced challenges related to liquidity and insolvency, with Bitcoin benefiting from this trend. 

Despite the stock markets falling and the U.S. Dollar Index putting in a pump, Bitcoin has been able to rise over $1,000 intraday to over $28,000/USD per coin off the back of this news, seemingly unfazed by the stock market and USD movements.

It will be an interesting watch from here to see if this fundamental impact can drive Bitcoin’s price further upwards, clearing important resistance overhead.

The idea that Bitcoin is a better investment option than banks has gained traction, and this narrative could be just what the market required. If Bitcoin is able to maintain its current levels and test previous highs, it could signal a significant upward trend for the cryptocurrency, potentially leading to further price appreciation in the future.

Of course, the market is still in a ‘bear market’, so traders always need to be weary of bear market rallies.

Other cryptocurrencies in the market are not experiencing any notable surge, indicating a decrease in the possibility of an alt season. Bitcoin’s dominance, which has risen following the recent price surge, has reached a 10-day high, with an increase of 0.83% to 47.82%.

Big watch from here across the next few weeks as the market is eagerly awaiting the next interest rate hike (if there is one).