Gold, Cash and Bitcoin Receive Massive Boost from Banking Crisis

Gold, cash and Bitcoin saw significant inflows last week after nervous investors scrambled for safe havens in the midst of a trans-Atlantic major banking crisis.

Within the last week, after US authorities bailed out both Silicon Valley Bank and Signature Bank, over US$110 billion has poured into cash conversions and US$600 million into gold reserves. In Europe, the struggles of Credit Suisse have not gone unnoticed and are likely affecting investor sentiment, too.  

Inflows into cash of these quantities have not been seen since April 2020, placing this quarter on track to witness the largest inward movement since the second quarter of 2020. 

Cryptocurrencies also received a boost and were up 41% in value overall, with Bitcoin being the main beneficiary. The market has been rattled, with even commodities like silver seeing atypical inflows. Shorting activity on two-year treasury bonds has also escalated as investors look for safety from volatility.

With inflation already driving interest rates continually higher, the latest banking crisis is unwelcome. Analysts point out that banking crises are followed by tighter lending standards and lower risk appetite, with small businesses most negatively affected as they are most reliant on bank lending.

The worst may have been averted thanks to the provision of huge sums of emergency cash from central banks, the lenders of last resort. However, markets remain edgy, with benchmark indexes of shares in US and European banks losing 20% and 13%, respectively.