Bitcoin saw a brief surge of 3.7% on Thursday before paring the gains to trade at $29,055 as of 7:40 a.m. in London. Other cryptocurrencies such as Ether, Cardano and Avalanche also saw gains. According to Stefan von Haenisch, head of sales trading at OSL SG Pte in Singapore, the surge was due to short positions being liquidated into a market that exhibits thin order books, pushing up the Bitcoin price.

The April 26 rally was likely due to Bitcoin being viewed as a hedge for US banking angst, which flared up again around First Republic Bank. Some market watchers believe that Bitcoin embodies an alternative to the fiat-based banking sector. On Wednesday, Bitcoin surged as much as 7.3%, but quickly erased the gains and fell into the red. This left investors unsure of what to make of the swings in crypto prices. Theories behind the quick retreat included a well-known trading firm dumping Bitcoin, the US government selling the cryptocurrency, and tokens connected to the Mt. Gox collapse being reintroduced into the market.

Bitcoin has rebounded 75% in 2023 from last year’s decline, despite a US crypto crackdown and the collapse of the FTX exchange. Expectations that the Federal Reserve will eventually pivot to lowering interest rates have helped to breathe life into digital-asset markets. However, Bitcoin has struggled to move past the $30,000 mark and remains $40,000 down from its 2021 record. Noelle Acheson, author of the “Crypto Is Macro Now” newsletter, notes that Bitcoin is a risk asset, but it is also an “insurance” asset, making it an intriguing banking strain play: one of the only assets that can straddle both narratives.