Bitcoin Feels Heat from TradFi ‘Cockroaches,’ Yet Fed Response May Boost Prices

Regional Bank Credit Woes Drag Bitcoin and U.S. Stocks

U.S. stocks and Bitcoin (BTC) fell on Thursday as credit concerns in the regional banking sector surfaced amid a slowing economic backdrop. JPMorgan CEO Jamie Dimon warned on the bank’s earnings call that “when you see one cockroach, there are probably more,” referring to recent bankruptcies of First Brands and Tricolor Holdings. Mark Lipschultz, co-CEO of Blue Owl Capital, added that banks should carefully review their own books for hidden risks.

The impact on the banking sector was significant. Jefferies (JEF), which handled First Brands, has dropped 25% over the past month, including a 9% decline Thursday, although the firm claims it can absorb the losses. Zions Bancorp (ZION) reported a $50 million charge on troubled loans, while Western Alliance (WAL) filed a fraud lawsuit against a commercial real estate borrower. ZION and WAL fell 12% and 10%, respectively, weighing on regional banking stocks.

Market Reaction and Bitcoin

The S&P 500 edged down 0.8%, while gold rose 2.5% to nearly $4,300 per ounce, benefiting from risk-off flows. Bitcoin, however, continued to act as a risk-on asset, dropping to $107,500 before recovering slightly to $108,000, down 3.2% over 24 hours and 11% over the past week. Historically, crises like March 2020 and March 2023 initially pushed BTC lower alongside equities, but government intervention and Fed easing later fueled strong rallies.

Early Signals of Monetary Easing

Bond market moves suggest that investors are anticipating monetary support. The 10-year Treasury yield fell to 3.97%, and the two-year yield declined to 3.42%, a three-year low. Short-term CME futures now price in a 3.2% chance of a 50-basis-point Fed rate cut this month and an 11% chance of a 75-basis-point cut by year-end, signaling growing expectations that easing could provide a boost to Bitcoin and broader risk markets.