Bitcoin Tests $29k Amidst Banking Sector Woes, Crypto Firms Expanding Offshore, And Key Interest Rate Hikes

May 2023 started with yet another tumultuous week for the US Banking sector. On May 1, 2023, the federal government seized First Republic Bank following weeks over which depositors and investors pulled out their money. First Republic Bank was initially bailed out in March 2023 after receiving US$30 billion in deposits from the United States’ (U.S.) largest banks.

According to a May 1, 2023 press release, JPMorgan Chase confirmed that it had acquired a substantial majority of assets and assumed the deposits and certain liabilities of First Republic Bank through a competitive bidding process from the Federal Deposit Insurance Corporation (FDIC).

According to a company blog post, Gemini crypto exchange revealed plans to expand to the Asia-Pacific (APAC) region to grow its international business and capitalize on increasing demand for crypto and Web3 products. On May 1, 2023, Gemini announced that its derivatives platform, Gemini Foundation, was open for trading to eligible customers except those in the U.S., the United Kingdom, and the European Union.

On May 2, 2023, Coinbase Global Incorporation announced the launch of Coinbase International Exchange, which shall offer derivatives trading out of Bermuda. Coinbase International Exchange will offer perpetual Bitcoin and Ethereum perpetual futures to institutional investors outside the U.S.

On May 2, 2023, the US Bureau of Labor Statistics released the Job Openings and Labor Turnover Survey (JOLTS) for March 2023. The survey revealed that job openings decreased to 9.6 million on the last business day of the month, down from almost 10 million reported for February 2023.

The decline in job openings suggests some softening in the U.S. labour market. The number of hires and total separations remained unchanged at 6.1 million and 5.9 million, respectively, while layoffs and discharges (1.8 million) increased.

On May 3, 2023, the Federal Reserve’s Open Market Policy Committee (FOMC) raised the benchmark interest rate by 25 basis points, taking the Fed funds rate to a target range of 5.00% to 5.25%. The FOMC will closely monitor incoming information and assess the implications for future monetary policy.

On May 4, 2023, the Governing Council of the European Central Bank decided to raise its three key interest rates by 25 basis points, noting that though headline inflation had declined over recent months, underlying price pressures remained. The ECB interest rate hikes are effective May 10, 2023.

In the 24 hours before the Fed’s interest rate decision, Bitcoin and Ether traded at around US$28,300 and US$1,850, respectively, according to CoinGecko data. However, after the Fed interest rate announcement, Bitcoin and Ether tested the US$29,000 and the US$1,900 price marks, respectively, though both cryptocurrencies have retraced slightly as of press time.

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