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On Sunday, as the U.S. government worked behind the scenes with two major banks to engineer the latest financial rescue plan, the Bitcoin network hit a new all-time high for the number of daily transactions processed. There were more confirmed transactions than it ever had in its 14-year history, beating the previous record set during the 2017 bull run. Today, JPMorgan Chase has acquired First Republic after the distressed banks assets were seized by regulators, becoming the second-largest bank failure in U.S. history.

While the two events Bitcoins surging use and the latest example of U.S. financial calamity are not exactly related, the timing here does suggest something about the future of the crypto industry and bitcoins possible place in an evermore-dysfunctional economy. At the same time regulators and legislators are working to lessen cryptos inroads into the wider economy, the private banking sector is showing itself to be unable to manage itself.

This article is excerpted from The Node, CoinDesk's daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

After weeks of uncertainty and a slumping stock price, First Republic was taken over by the Federal Deposit Insurance Corporation (FDIC) in a bid to prevent a possible bank run, further contagion and a drawdown of the insurance funds reserves. The federal banking watchdog immediately sold all of [First Republics] deposits and substantially all of [its] assets to JPMorgan Chase, the largest U.S. bank, which was also provided $50 billion in financing to complete the deal. Democratic politicians are likely to challenge the sale, which was reportedly rushed through to close before markets opened on Monday.

Our government invited us and others to step up, and we did, JPMorgan CEO Jamie Dimon said. Crypto fans may know Dimon as one of the highest-profile advocates of blockchain and long-time bitcoin critic. First Republics failure is second only to Washington Mutual, which failed during the Great Financial Crisis that also gave rise to bitcoin. While some amount of blame could be put on First Republics management, economists are largely aligned in thinking its collapse is at least partially due to rising interest rates and the Federal Reserves hawkish monetary policy that also brought down the Silvergate, Silicon Valley and Signature banks early this year.

Where this situation aligns with bitcoin in particular is that the crypto industry is part and parcel of a wider political realignment towards populism. Crypto is not the only movement challenging the authority of central banks and established powers, as many people will see the First Republic bailout as another example of profits being privatized while losses are socialized. In trying to prevent a massive drawdown on FDIC reserves, political operators have essentially said that all U.S. banks are too big to fail a type of moral quandary that protects a certain class from the consequences of their decisions.

Bitcoin has emerged as an alternative monetary system, which many think could eventually serve as a legitimate global reserve currency like the U.S. dollar is today. The system is attractive to some because it follows prewritten rules, including a fixed monetary issuance schedule set by social consensus (unlike the political and monied interests that rule the greenback). Bitcoins price rose steadily during the last cycle of banking failures, and might also catch a wave up this time. This doesnt necessarily mean bitcoin is a hedge against financial calamity, or that people are choosing trustless financial systems over increasingly untrustworthy banks.

The timing of the Bitcoin blockchains latest milestone is purely incidental. Bitcoin transactions have been trending up since the launch of Bitcoin Ordinals, which enabled the network to support non-fungible tokens (NFT). More than 2.39 million Ordinals have been inscribed to date, according to Glassnodes data cited by Blockworks. But, even though Bitcoin NFTs now account for roughly half of the transactions on the network (rewarding bitcoin miners with increased transaction fees, and potentially helping secure Bitcoins long-term security budget), not all bitcoiners are aligned in thinking this is a worthwhile feature.

There are many bitcoin purists who think the network should be preserved for monetary uses and that tradable digital collectibles are frivolous. Sorry for them, Bitcoin is an open-source network meaning people are free to use the technology as they please. If Bitcoin has a role to play in the future global economy, its only because people are free to use it how they want.

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Bitcoin Set New Record of Daily Transactions the Same Day the U.S. Government Quietly Engineered a Bank Buyout - CoinDesk

May 2 (Reuters) - Can inherently volatile cryptocurrencies become safe-havens? Apparently they can in some parts of the world, such as Argentina and Turkey, where soaring prices and tumbling local currencies have forced people to seek refuge in digital coins.

Ownership of digital currencies in Turkey was the highest in the world at 27.1% followed by Argentina at 23.5% -- well above global crypto ownership rate estimated at 11.9% -- according to data from research firm GWI.

What's common to Turkey and Argentina besides their pole positions in crypto adoption is high inflation, which has led to crumbling currencies and capital controls to deter local residents from taking money out. Turkey's annual inflation was 50.51% in March, Argentina's was even higher at 104%.

The lira and peso have been plunging and are at record lows. Argentina's peso trades around 464 per dollar in the black market , more than double the official exchange rate of 222.

Much of the safe-haven buying has been of stablecoins such as USD Coin (USDC) and Tether (USDT), which are crypto tokens pegged one-to-one to a traditional asset such as the U.S. dollar or gold, giving investors an alternative to scarce dollars.

"Folks, whether they're on the retail side or institutional side, are thinking about how can we hedge against currency devaluation," said Ehab Zaghloul, chief research scientist at Tribal Credit, a digital payments platform for startups in emerging markets.

"They want to potentially hold additional assets pegged to a stronger currency, so, things like USDC or USDT or anything pegged to a stronger currency like the U.S. dollar."

Trading volume for the USDT-Turkish lira pair reached a multi-month high last week, driven by the weakening of the Turkish currency and the upcoming landmark presidential and parliamentary elections, Kaiko analyst Dessislava Aubert said.

"In general, crypto adoption tends to be higher in countries with capital restrictions, financial instability, and political instability," analysts at K33 Research wrote.

While bitcoin , the world's biggest and best-known cryptocurrency, is up 72% this year at $30,000, its highest in 10 months, overall trading volumes are far from levels seen last summer after investors were spooked by a series of collapses of crypto players culminating in FTX's demise.

Trading volumes for spot bitcoin are highest during U.S. opening hours, with little change from 2022, Kaiko data showed.

However, regulatory issues faced by crypto exchange Binance in recent months have led to a slight shift in derivative trading volume towards Asia Pacific hours from Americas, Kaiko said.

If dollar to crypto volumes are excluded, then the next most dominant currency is South Korea's won .

Crypto trading volumes in South Korea are back to levels seen in first quarter and second quarters of 2022 after a weak fourth quarter in 2022, analysts at crypto investment firm Matrixport said.

"The dominance of altcoins makes South Korea a very interesting market to analyse," Matrixport analysts said.

"This is in stark contrast to other crypto exchanges where bitcoin and Ethereum account for the majority of the volume."

Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Vidya Ranganathan and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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Cryptoverse: Digital coins lure inflation-weary Argentines and Turks - Reuters

Bitcoin is under pressure as the Federal Reserve has indicated that rates could go higher than expected and after a major crypto-focused lender, Silvergate Capital, collapsed.

Jonathan Raa | Nurphoto | Getty Images

Cryptocurrencies took a dip on Monday to start the week and new month as investors bet the takeover of First Republic Bank could put an end to the financial crisis, which has been the biggest driver of this year's bitcoin rally.

Bitcoin fell about 4.2% to 28,137.76 to start the week and new month, according to Coin Metrics. Ether lost 4% to 1,828.81.

On Monday regulatorstook possession of First Republic, making it the third U.S. bank failure this year and the biggest one since the 2008 financial crisis. JPMorgan Chase will acquire most of its deposits and assets.

Last week, the price of bitcoin rallied in the final week of April as troubles at the bank unfolded. Trading of the cryptocurrency has been choppy, however, as investors straddle the effects of the banking crisis on crypto with high inflation, Federal Reserve policy, a potential recession and an increasingly bearish narrative building around the U.S. dollar.

"It's unclear whether the banking crisis narrative can continue to be a boon for bitcoin," said Alex Thorn, head of firmwide research at Galaxy. "Overall, the market lacks clear positive near-term catalysts, with supply issues overhanging bitcoin That being said, bitcoin accumulation by small addresses is outpacing issuance, and we expect Ethereum staking to increase, each of which provides a supportive supply narrative."

"Outside of crypto-native factors, we expect a back-of-the-year macro environment to be characterized by tightening, recession, and an expanding multipolarity in the global economy, all of which can be supportive of gold and bitcoin," he added.

Investors have been expecting a slowdown from bitcoin's first-quarter rally, although cryptocurrency remains on its upward trend and has gained about 70% for the year, after finishing down more than 60%. April marked the first time in two years that bitcoin notched a fourth consecutive positive month.

"Bitcoin and ether started 2023 inorganically cheap, allowing for plenty of room to move higher off a low-base effect," Thorn said. "A widening banking crisis became evident in March and the contrast with Bitcoin's transparent and decentralized nature provided a further leg up for bitcoin, while Ethereum's successful Shanghai upgrade provided a catalyst for ethereum."

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Bitcoin pulls back to start May as First Republic Bank saga comes to an end - CNBC

(Bloomberg) -- Bitcoin slipped back Monday after climbing for four consecutive months through April in the longest such winning run since 2021.

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The token slid as much as 4.5% and was trading at $28,221 as of 2:16 p.m. in New York. Smaller coins such as Ether and Solana also retreated, as did an index of the top 100 digital assets.

Bitcoins 72% rebound in 2023 from last years crypto rout has stalled around the $30,000 level as traders await further catalysts. The rally has been fueled by bets on an eventual Federal Reserve pivot to looser monetary policy as well as arguments that the US banking crisis eroded confidence in fiat currency.

First Republic Bank is at the center of the latest leg of the banking woes in the US. JPMorgan Chase & Co. won the bidding to acquire the bank in an emergency government-led intervention after private rescue efforts failed to fill a hole on the troubled lenders balance sheet and customers yanked their deposits.

The market is very jittery as it waits to see what happens to First Republic Bank, said Adrian Przelozny, head of crypto exchange Independent Reserve. Mondays Bitcoin wobble may be just volatility related to this, and some long positions got liquidated as the market dropped a bit, which then cascaded.

Bitcoins four-month stretch of gains through April ranks as the longest since a six-month advance to March 2021. In the past decade, four-month winning runs in Bitcoin foreshadowed an average surge of 260% over the subsequent year, data compiled by Bloomberg show.

Bitcoin and the wider crypto world remain exposed to a variety of risks, such as the US crackdown on the sector and the possibility of traders paring back expectations that monetary policy will become less restrictive later this year.

Story continues

For now, the Fed is expected to boost interest rates by another quarter percentage point on Wednesday to damp inflation even as economic risks build.

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Bitcoin Sags After its Longest Streak of Monthly Gains Since 2021 - Yahoo Finance

What happened

Since late afternoon yesterday, the price of the world's largest cryptocurrency, Bitcoin, has traded 3.5% lower as of 1:42 p.m. ET today as investors braced for the Federal Reserve's upcoming meeting, which begins tomorrow.

The Fed is widely expected to raise interest rates by a quarter of a point when it wraps up its meeting on Wednesday, but I think the market will be paying closer attention to the Fed's remarks after its meeting.

One of the big reasons Bitcoin and the crypto market have rallied this year is the belief that the Fed will end its intense interest rate hiking campaign, which has proved devastating to riskier assets like Bitcoin. But it's still not a given because the trajectory of inflation may prove stickier than the market thinks, although there have been signs of inflation slowing in recent months.

Another potential reason for the decline in Bitcoin today could also have to do withJPMorgan Chase's acquisition of most of the assets fromFirst Republic Bank. First Republic has really struggled since the banking crisis began in March and saw more than $100 billion of deposit outflows in the first quarter of the year.

The acquisition by JPMorgan helps to stabilize the banking system and it also resulted in a smaller loss to the Federal Deposit Insurance Corp.'s (FDIC) Deposit Insurance Fund than many expected. Because cryptocurrencies were developed as an alternative to the mainstream banking system, Bitcoin has tended to perform well when investors were worried about the banking system.

The belief that the Fed will soon pause its interest rate hikes and struggles in the banking system have been two consistent themes driving Bitcoin higher this year.

But now investors are nervous about the Fed meeting and a resolution to First Republic does provide some stabilization in the sector. However, I still think Bitcoin will be a good long-term investment and is worth having some exposure to.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and JPMorgan Chase. The Motley Fool has a disclosure policy.

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Why Bitcoin Is Falling Today - The Motley Fool