Warning from JPMorgan CEO: Bank Crisis is Affecting Bitcoin

U.S. stock markets are having a weak week as issues related to credit in the banking sector come to light. While gold hits a record high, Bitcoin comes under renewed selling pressure.

During a period when the economy in the country shows signs of slowing down, banking-related troubles are increasing. JPMorgan CEO Jamie Dimon highlighted the fragility in the sector during the quarterly earnings meeting, stating, “If you've seen one cockroach, there are probably more.” Recent bankruptcies of institutions like First Brands and Tricolor Holdings have intensified the negative impact on the sector. One of the institutions most affected by the bankruptcies, Jefferies (JEF), has seen its shares decline by 25% in the past month. Although the company stated that it could tolerate the losses, investor confidence is shaken.

Additionally, Zions Bancorp (ZION) announced a $50 million loss against two loan files, while Western Alliance (WAL) filed a fraud lawsuit related to commercial real estate loans. The stocks of these two banks fell by 12% and 10%, respectively. The decline in risk appetite has caused gold to come back into focus.

Gold prices surged 2.5%, reaching a new record level of approximately $4,300. However, Bitcoin, referred to as “digital gold,” did not benefit from this safe-haven rally. The price of Bitcoin fell to $107,500 during the day and is currently trading around $108,000. It experienced a drop of 3.2% in the last 24 hours and an 11% decline on a weekly basis.

Historically, expansive policies following macro shocks during the COVID collapse in 2020 and the banking crisis occurring in 2023 had prepared the ground for new increases in Bitcoin. A similar scenario may be reshaping. The yield on the U.S. 10-year Treasury bond fell eight basis points to 3.97%, while the two-year bond yield dropped to 3.42%, the lowest level in three years.

The market prices the likelihood of a 50 basis point rate cut by the Federal Reserve at this month’s meeting at 3.2%, while the probability of a total rate cut of 75 basis points by the end of the year has risen to 11%. This situation raises the prospect of a potential recovery for risky assets.