By Ketki Saxena
Investing.com -- Bitcoin is experiencing its most significant daily increase in nearly a month. The boost in Bitcoin's value appears to be a reaction to Moody's recent downgrade of several medium-sized US banks and threats to larger ones.
Moody's has placed The Bank of New York Mellon (NYSE:BK), US Bancorp (NYSE:USB), State Street , and Truist Financial under review for potential downgrades. This action follows the recent downgrades of 10 smaller banks. In a note, Moody's highlighted that many banks' second-quarter results showed increasing profitability pressures that could limit their ability to generate internal capital. The ratings agency also warned of an impending mild U.S. recession in early 2024 and a potential decline in asset quality, particularly within some banks’ commercial real estate portfolios.
During the peak of banking troubles in March, Bitcoin surged from $20,000 to $28,000 and later continued to $30,000. Signs of renewed issues in the banking sector are likely supporting Bitcoin's price action today. Technically speaking, Bitcoin seems to have established a bottom near $28,500 last week and again this week, indicating a potential double bottom that could target $31,000.
In broader terms, Bitcoin enthusiasts are optimistic about potential ETF approval as filings continue to roll in for BTC and ETH exchange-traded products. Reports suggest that the SEC is open to considering allowing ETFs, which would simplify owning crypto in retirement accounts for Americans.
Major U.S. banks including U.S. Bancorp (NYSE:USB), State Street Corp. (NYSE:NYSE:STT), and Bank of New York Mellon Corp (NYSE:BK) trended lower on Tuesday following Moody's announcement. The U.S. banking industry is grappling with ongoing challenges related to interest rate, asset, and liability management risks which are impacting liquidity and capital.
In addition to the larger banks, Northern Trust Corp. (NASDAQ:NASDAQ:NTRS), Cullen/Frost Bankers Inc. (NYSE:CFR), and Truist Financial (NYSE:TFC) are also under review for potential downgrades by Moody's.
The news follows last week's downgrade of U.S. debt by Fitch. The Invesco KBW Bank ETF (NASDAQ:KBWB), reflecting the performance of U.S. banks, is down by more than 10% year-to-date.