What happened

Cryptocurrencies are having a banner week, despite chaos in the broader market, especially in the banking sector, which is likely due to the fact that many see cryptocurrencies as an alternative to the traditional banking system.

Over the last week, the price of the world's largest cryptocurrency, Bitcoin (BTC -1.34%), traded roughly 25% higher as of 1:35 p.m. ET Thursday, according to data from S&P Global Market Intelligence.

Meanwhile, the price of the world's second-largest cryptocurrency, Ethereum (ETH -0.16%), traded roughly 17% higher, and the price of Bitcoin Cash (BCH -3.36%) was up more than 14%.

So what

Bitcoin was really invented in the wake of the Great Recession. People didn't trust the mainstream financial system or the government for that matter, which led to the creation of decentralized blockchain technology and the cryptocurrencies that trade on these networks.

People looking at upward stock chart.

Image source: Getty Images.

Three banks -- Silvergate CapitalSVB Financial's Silicon Valley Bank, and Signature Bank -- collapsed over the last week. Also, Swiss bank Credit Suisse came under intense selling pressure this week and had to borrow 50 billion Swiss Francs from Switzerland's central bank to shore up liquidity.

I think this week reminded people of why Bitcoin got started in the first place. However, Silvergate and Signature ran real-time payment platforms used mainly by crypto exchanges and other crypto clients. Meanwhile, SVB had banked many crypto start-ups.

I am surprised cryptocurrencies have fared so well given everything that has happened. For one, the collapse of Silvergate and the closure of Signature shutters two of the main fiat on-and-off rails that crypto firms were using to swap dollars for cryptocurrencies and vice versa, which raises liquidity concerns. Additionally, media reports suggest that any potential buyer of Signature must agree to forgo the bank's crypto business.

This also suggests that banking regulators are looking to drive crypto away from the traditional banking system. Former Sen. Barney Frank, who authored critical banking regulation following the Great Recession known as Dodd-Frank and also sat on Signature's board of directors, has now repeatedly said he thinks the closure of Signature was related to "a very strong anti-crypto message."

Bitcoin also seems to be holding up despite the fact that the European Central Bank raised interest rates by a half-point this morning. Rising rates crushed cryptocurrencies all throughout 2022 and the Federal Reserve will convene next week to discuss whether or not the agency should keep raising interest rates in the U.S.

Now what

Bitcoin and crypto price action are very, very tough to predict, so while I'm surprised to see crypto investors shaking off all of the bad news this week, never say never in this sector. Additionally, I do think all of the banking issues are helping to drive Bitcoin higher.

For now, I'd keep an eye on how the Fed moves next week. A rate hike will likely not be so favorable for crypto while no rate hike could be very positive. Ultimately, I continue to like Bitcoin and Ethereum and think they will be here for the long haul.