Bitcoin jumped to its highest level in nine months after initially collapsing following the recent bankruptcy of US banks including Silicon Valley Bank (SVB), Signature Bank and Silvergate Capital.

After trading around US$22,000 last week, the cryptocurrency fell below US$20,000 in the immediate aftermath of the SVB crash, before rising above US$26,000 after US regulators secured all deposit accounts at the two banks.

According to experts, the initial drop in prices was a reaction to the predicament surrounding the collapse of US banks. Namely, all three are said to have had huge exposures to the troubled crypto and tech spaces, with Signature Bank and Silvergate Capital known as crypto-friendly banks.

Speaking to InvestorDaily, Angel Zhong, Associate Professor of Finance at RMIT University, said that crypto investors initially expected a "full spread" in the tech and crypto sectors.

"Investors reacted dramatically to the collapse of SVB. It caused panic that it would quickly turn into a global financial crisis,” she said.

"However, SVB is a regional bank with no systemic importance. As such, its collapse is less likely to trigger another global financial crisis. As such, in a way, the big drop in crypto prices [was] investor overreaction.

The subsequent recovery in crypto prices is directly related to the actions taken by US regulators, Dr. Zhong explained, noting that it came as a "huge relief" to bank customers and had a positive impact on investor sentiment.

In light of the recent drop in Credit Suisse's share price, Dr Zhong suggested that investors are beginning to see the danger of centralized assets.

“When centralized institutions are in crisis, diversification into decentralized assets like crypto is more attractive. This is another reason why crypto prices are increasing,” she said.

However, Dr. Zhong reminded that businesses operating in the crypto space are not fully decentralized.

"First, in general, most investors may not fully understand the relationship between the crypto space and centralized institutions like the SVB," she said.

"Second, with the further development of infrastructure such as Web 3.0, it is possible to build a fully decentralized system in the future without much dependence on centralized institutions."

The predicted rate easing is expected to benefit crypto

Meanwhile, AMP chief economist Shane Oliver said investors hoped the recent difficulties could signal a turnaround among global central banks.

Some economists have suggested that the Fed and Reserve Bank (RBA) may slow or stop raising interest rates in response to the collapse of US banks and problems at Credit Suisse.

"Despite the turmoil seen in the banks and concerns about the risk of a recession, you've seen the NASDAQ and you've also seen bitcoin rise," Dr Oliver said.

"I think it's a reflection of the news that you have some sort of crisis, so we're going to see a return to easy money, which will be good for Bitcoin."

However, Dr Oliver said this did not mean bitcoin would be seen as safer than other investments, such as traditional bank deposits.

"We've seen when there's some kind of crisis that leads to slower growth and easy money or lower interest rates, then bitcoin benefits, just like the NASDAQ benefits," he said.

"But I think what's really happening here is not necessarily a sign that bitcoin or crypto has suddenly become a safe haven in some way."