Bitcoin Faces TradFi Turbulence, Yet Fed Intervention Could Turn Bullish

Regional Bank Credit Worries Pressure Bitcoin and U.S. Stocks

U.S. stocks and Bitcoin (BTC) fell Thursday as credit concerns in regional banks came to the forefront amid a slowing economy. JPMorgan CEO Jamie Dimon warned on the bank’s earnings call that “when you see one cockroach, there are probably more,” referencing the recent bankruptcies of First Brands and Tricolor Holdings. Mark Lipschultz, co-CEO of Blue Owl Capital, added that banks should scrutinize their own books for similar risks.

The impact on banks has been sharp. Jefferies (JEF), First Brands’ banker, has dropped 25% over the past month, including a 9% decline Thursday, though the firm says it can absorb losses. Zions Bancorp (ZION) recorded a $50 million charge tied to troubled loans, while Western Alliance (WAL) filed a fraud suit against a commercial real estate borrower. ZION and WAL fell 12% and 10%, respectively, leading losses in the regional banking sector.

Market Reaction and Bitcoin

The S&P 500 slipped 0.8%, while gold surged 2.5% to near $4,300 per ounce as investors sought safe havens. Bitcoin acted differently, sliding as low as $107,500 before bouncing to $108,000, down 3.2% in 24 hours and 11% over the past week. Historically, crises like the March 2020 COVID crash and March 2023 bank failures initially pressured BTC alongside stocks, but government intervention and Fed easing later fueled rallies.

Early Signs of Monetary Support

Bond market indicators point to potential policy easing. The 10-year Treasury yield fell to 3.97%, while the two-year yield dropped to 3.42%, a three-year low. CME futures now imply a 3.2% chance of a 50-basis-point Fed cut this month and an 11% chance of a 75-basis-point cut by year-end, suggesting that investors are pricing in possible monetary support that could benefit Bitcoin and other risk assets.