After the Bitcoin price slipped below $28,500 late Sunday night (EST), the hoped-for bounce in response to the seizure of First Republic Bank (FRC) has failed to materialize. While recent bank failures have sparked an upward momentum for Bitcoin, the price is currently hovering around $28,600.
First Republic Sold To JP Morgan
Over the weekend, attempts were made to prevent a collapse of First Republic Bank. A few hours ago, the U.S. Deposit Insurance Corporation found a solution: JP Morgan Chase will buy FRC. The banking giant will take over the assets of First Republic Bank.
The California Department of Financial Protection and Innovation (DFPI) announced that the US deposit insurer Federal Deposit Insurance Corporation (FDIC) has accepted JPMorgan’s offer to take over the financially distressed regional bank. First Republic’s branches will reopen as JPMorgan Chase.
Remarkably, even U.S. law was set aside for this, as U.S. banks are not allowed to make acquisitions that would give them more than 10% of U.S. deposits. As The Kobeissi Letter wrote, JP Morgan already owned 16.1% of all U.S. bank deposits prior to the deal. Thus, the largest bank in the U.S. becomes even larger.
Percentage of Deposits Controlled by US Banks:
1. JP Morgan: 16.1%
2. Bank of America: 14.8%
3. Wells Fargo: 10.9%
4. Citibank: 5.8%
5. US Bank: 3.4%
6. Truist: 3.4%
7. PNC Bank: 3.3%
8. TD Bank: 2.9%
9. Charles Schwab: 2.7%
10. Capital One: 2.6%
The top 15 banks control 75% of…
— The Kobeissi Letter (@KobeissiLetter) April 30, 2023
According to insiders, half a dozen banks participated in the bidding process for First Republic Bank, including Citizens Financial and PNC Financial Services. JPMorgan will assume all of First Republic’s remaining $103.9 billion in deposits and buy most of its $229.1 billion in assets, the FDIC announced.
Under the agreement, the FDIC will share losses with the bank. The agency estimated that its insurance fund would take a $13 billion hit in the deal.
Bitcoin Price Remains Sub $29,000
In the Bitcoin and crypto community, the collapse of First Republic Bank caused not only schadenfreude, but also hope for a rise in the price. As with the first wave of bank failures in the U.S., there was hope that the bailout would increase liquidity in the financial system.
BitMEX founder Arthur Hayes wrote in advance that the problem with FRC is that its balance sheet contains few government bonds and a lot of other assets like commercial real estate loans that were not suitable collateral for the Bank Term Funding program.
Therefore unless some muppet bank decides to bail out FRC, expect over the weekend the Bank Term Funding Program is expanded to allow other types of loans to be eligible to be swapped for freshly printed dollaz.
And then $BTC will take another leg up as another few trillion $ are added to the tab. Money Printer go Brrr!!!
Unfortunately for Bitcoin investors, this did not happen as JP Morgan was given special permission to take over FRC. At press time, the Bitcoin price was at $28,574, stabilizing after Sunday’s drop.
Featured image from iStock, chart from TradingView.com
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