- Altcoins like Hedera Hashgraph, Flare, and Internet Computer retreated on Tuesday.
- Regional banks like PacWest and Western Alliance retreated.
- These banks could impact the Fed decision.
Hedera Hashgraph, Flare, VeChain, and Internet Computer (ICP) prices dropped sharply as concerns about the banking sector continued. HBAR dropped to $0.058 while Flare, VET, and ICP retreated to $0.029, $0.021, and $5.73, respectively. Other large coins like Bitcoin, Cronos, and Bitcoin Cash held quite well.
Western Alliance, PacWest stocks price plunges
A key concern among investors is the health of the banking sector after Monday’s collapse of First Republic Bank. Analysts believe that other regional banks could go out of business as well. Most of these companies are seeing a sharp increase in outflows as people and businesses allocate their cash to large systemic banks like Bank of America and JP Morgan.
The other concern is that the commercial real estate sector is imploding. This multi-trillion-dollar industry is contending with rising interest rates, low occupancy rates, and upcoming maturities. Many commercial properties are expected to be foreclosed in the coming months as refinancing challenges continue.
The situation in the regional bank industry is not good. The closely watched SPDR Regional Bank ETF (KRE) stock has plunged by more than 10% in the past five days alone. It has fallen by over 30% in the past 3 months.
Individual retail stocks have performed worse. For example, Western Alliance Bancorp and PacWest stocks have plunged by over 15% on Tuesday. They have all dropped by more than 37% and 75%, respectively. The challenge is that the performance of these stocks will lead to more outflows.
Implications for Hedera, VeChain, Flare, ICP prices
The collapse of these banks will have an impact on cryptocurrency prices like Bitcoin and Hedera Hashgraph. For one, it will lead to more inflows in cryptocurrencies, which explains why Bitcoin has done better than other assets in the past few days.
Most importantly, it will have an impact on the Federal Reserve, which started its meeting on Tuesday. The risk of more bank failures could lead the Fed to adjust its monetary policy by either leaving rates unchanged or delivering a dovish rate hike. A dovish hike is when the bank increases rates and then pledges to either leave rates unchanged in the future.
Historically, cryptocurrencies like Ethereum and Bitcoin tend to do well when the Fed is a bit dovish. This explains why most of them retreated when the Fed was hiking interest rates in 2022.
Therefore, despite the pullback by Hedera, Flare, VeChain, and ICP, there is a likelihood that they will bounce back in the near term.
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