The price of a single bitcoin has recently rallied to almost $29,000. That’s approaching double its value at the end of last year, which was not a very good year for crypto.
Recall that 2022 saw a string of major bankruptcies in the industry — most notably, for exchange FTX in November. But bitcoin and other digital currencies are riding a wave of momentum that started last month, around the time of Silicon Valley Bank’s collapse, and the government’s response.
At The Bagel Exchange in Alhambra, California, one of the first things you see when you walk in is a machine that sells bitcoin and other cryptocurrencies.
Owner Ryan Natividad says you can pay for your schmear with cash, credit or crypto — and not just bitcoin and the other big ones.
“We accept Litecoin and Matic. Someone paid with Eightcoin the other day,” he said.
Natividad also has a giant stock ticker mounted to the wall, above four TV screens that play financial news and a livestream on Twitch.
Making a matcha green tea latte, Natividad said he paid for this place from his own crypto winnings and he’s sticking with it.
“I still believe in Bitcoin and Ethereum. I feel like it’s gonna be around for a while,” Natividad said. “There’s a lot of bad news going around. Everybody just doesn’t know where to put their money.”
Bitcoin — the standard bearer of crypto — came out of a period when bad financial news was the norm: the Great Recession. The cryptocurrency came into being in January 2009 after a year of major financial failures.
This first wave of bank failures since then is a big test for crypto, said David Yermack, chair of the finance department at New York University’s Stern School of Business.
“Many of the larger banks appear to be vulnerable. Governments have not been particularly successful at bailing them out and shoring up public confidence,” Yermack said. “This is exactly the kind of dynamic that the creators of Bitcoin were trying to play into.”
And there’s some validation in this moment, per Sheila Warren, CEO of the industry group Crypto Council for Innovation.
“I think people are really feeling like: ‘This is what we’ve been talking about for so long, guys, right? Look back at 2008 and 2009!’ And now here we are. So I do think there is a quiet kind of recognition of that,” she said.
At the same time, many crypto enthusiasts and investors worry that regulators are trying to keep money from escaping the traditional banking system right now.
“There certainly seems to be a concerted effort of closing the exit ramps — closing the doors on crypto,” said entrepreneur Adam Jackson, founder of Cambrian Asset Management, a cryptocurrency hedge fund, which he launched in 2017.
Jackson points to the regulatory clampdown that’s intensified lately. Late last month, the world’s largest crypto exchange, Binance, was sued by the Commodities Futures Trading Commission for running an alleged sham compliance operation. And Coinbase said it was put on notice about potential charges from the U.S. Securities and Exchange Commission.
These developments have only added to the view some have that the financial system’s old guard is coming after crypto.
People tend to look for information that validates how they already view the world, said Hilary Allen, professor at the American University Washington College of Law.
“I could see how someone who very much wants to believe that crypto is the successor to traditional finance might interpret what has happened over the last few weeks as confirming that crypto will take over,” Allen said.
But while the latest banking crisis has shown that there are definitely problems in traditional finance, “I think those problems are replicated and exacerbated in the crypto system,” Allen added.
Back at The Bagel Exchange, Ryan Natividad is having one of his regular chats about crypto with Richard Valenzuela, who owns the bar next door.
“I come in here to make fun of him all the time,” Valenzuela said.
Even after all their talks, Valenzuela said crypto makes no sense to him. “People are like, ‘Oh, maybe it is worth something.’ But it’s like, how could something with no intrinsic value appreciate so much? I don’t get that,” Valenzuela said.
A lot of people don’t really get it. But crypto seems to be rallying anyway, as many wait to see what’s next for tech and the larger economy.