Bitcoin, the enigmatic digital currency, is back in the spotlight as the US banking system grapples with mounting stress. While some predict a surge to $1 million per coin, fueled by economic woes, others remain skeptical.

Banking in the face of Bitcoin’s growth?

Bitcoin Supporters see it as a beacon of stability during the storm. Unlike established institutional health assets, Bitcoin boasts a finite supply and decentralized nature. In their opinion, this is a perfect opportunity to take advantage of the “flight to safety” scenario, in which investors seek shelter from a potentially collapsing banking system.

Recent history seems to confirm this narrative. In March 2023, the failures of leading institutions such as Silicon Valley Bank coincided with a 40% escalate in the price of Bitcoin in a week. Industry data points to this as evidence of Bitcoin’s role as an “uncorrelated asset class” – a hedge against established financial turmoil.

Another reinforcement of this argument is latest report by the Federal Deposit Insurance Corporation (FDIC). The report paints a disturbing picture, highlighting a disturbing trend of unrealized losses on securities held by U.S. banks.

These losses, driven by rising interest rates, have grown to more than $500 billion. Additionally, the number of banks on the FDIC’s “problem banks list” increased from 52 to 63 in just one quarter, raising concerns about the overall health of the sector.

A million dollar dream or a flight of fantasy?

While Bitcoin’s upside potential seems undeniable, its ambitious $1 million price target faces significant headwinds. Experts warn that such a dramatic escalate could come at the cost of a complete economic collapse, which will not necessarily benefit Bitcoin in the long run.

Moreover, Bitcoin’s historical correlation with other assets is not unchanging. While there are periods of feeble correlation, there have also been instances of powerful correlation, particularly during broader market downturns. This calls into question Bitcoin’s ability to completely separate itself from the struggling established financial system.

Another factor to consider is the recent escalate in the M2 money supply, an indicator that represents the total amount of money circulating in the economy. Historically, periods of M2 expansion have coincided with Bitcoin price increases. However, the interplay between the money supply and Bitcoin in an environment with a potentially unstable banking system remains an open question.

The road ahead of Bitcoin

Featured image from pngtree, chart from TradingView