As the First Republic Bank saga comes to a close, Bitcoin has experienced a retreat to kick off the month of May, reversing its recent upward trend.

On Monday, cryptocurrencies saw a decline as investors speculated that the acquisition of First Republic Bank could potentially bring an end to the financial crisis that has been the primary driving force behind this year’s Bitcoin rally. According to Coin Metrics, Bitcoin experienced a 4.2% decrease to $28,137.76, while Ether lost 4% to $1,828.81.

Regulators took control of First Republic on Monday, making it the largest US bank failure since the 2008 financial crisis and the third such failure this year. JPMorgan Chase will acquire most of the bank’s deposits and assets. The price of Bitcoin rallied last week as troubles at the bank unfolded, but trading of the cryptocurrency has been volatile as investors weigh the effects of the banking crisis on crypto, along with factors such as high inflation, Federal Reserve policy, and the increasingly bearish narrative surrounding the US dollar.

Galaxy’s head of firmwide research, Alex Thorn, stated that it is unclear whether the banking crisis narrative will continue to benefit Bitcoin. The market lacks clear positive near-term catalysts, and supply issues still loom over Bitcoin. However, Thorn noted that Bitcoin accumulation by small addresses is outpacing issuance, and they expect Ethereum staking to increase, both of which provide a supportive supply narrative.

Thorn added that beyond crypto-native factors, a back-of-the-year macro environment could be supportive of gold and Bitcoin due to a tightening, recession, and expanding multipolarity in the global economy. Despite expectations for a slowdown from Bitcoin’s first-quarter rally, the cryptocurrency remains on an upward trend and has gained around 70% for the year, after finishing down over 60%. April marked the first time in two years that Bitcoin recorded a fourth consecutive positive month.

Thorn believes that Bitcoin and Ether started 2023 at an inorganically cheap price point, which allows for significant room for them to move higher off a low-base effect. A widening banking crisis became evident in March, and the contrast with Bitcoin’s transparent and decentralized nature provided a further boost for Bitcoin, while Ethereum’s successful Shanghai upgrade provided a catalyst for Ether.