Cryptocurrencies slid into the end of the trading day Wednesday, erasing losses from an earlier rally.
Bitcoin ended the day higher by less than 1% at $27,580.88, according to Coin Metrics. Ether fell about 1% to $1,835.88.
Earlier in the day, bitcoin jumped as much as about 8% and briefly reclaimed the $30,000 level. That helped lift ether, which advanced more than 6% at one point to about $1,950.
Bitcoin had been trading sideways for several days, with volatility back to its lows of early March, before the banking crisis began and became one of the cryptocurrency's biggest upward catalysts this year. Beginning late Tuesday, troubles at First Republic helped drive the cryptocurrency's price action again, according to Matt Hougan, chief investment officer at Bitwise Asset Management.
"Crypto rallies during banking crises, and it looks like the banking crisis may not be over," Hougan said.
First Republic shares fell almost 30% Wednesday, bringing its two-day loss to about 80%, after reporting a massive drop in deposits in the first quarter as customers pulled their money out following the collapse of Silicon Valley Bank. CNBC's David Faber reported that the next few days are crucial for the company, as other banks and federal officials seek to pull together a rescue plan.
Bitcoin rallied 22% in March as the crisis among U.S. regional banks opened investors' eyes to its potential uses as a hedge against uncertainty and as an alternative banking system.
"Bitcoin continues to straddle between being the ultimate lifeboat from the current banking system and the leading risk-on asset," said managing partner James Lavish at Bitcoin Opportunity Fund. "As First Republic is now on the verge of collapse, bitcoin represents a safe haven versus uncertain bank deposits."
Bitcoin's 30-day rolling correlation with gold has been climbing since March and now stands at 57%, its highest level in almost two years, according to crypto data provider Kaiko. Its correlation with the S&P 500 fell further in April to just 7%.Â
Fed concerns on the horizon
While the pullback over the past week didn't negate the year-to-date uptrend, uncertainty still looms over crypto.
Traders are watching the Federal Reserve for its latest decision on whether it will stop raising interest rates to fight high inflation and some direction and when it will begin cutting rates. The central bank's next policy meeting will take place next week, and the latest reading on its preferred inflation gauge, personal consumption expenditures, is due out at the end of this week.
"The crypto market learned last month that banking crisis works favorably for bitcoin's price but we need to approach it from multiple angles," said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank. "The Fed Funds futures market is pricing in the beginning of rate cuts later this year, and it could be a source of disappointment if the Fed continues to refrain from commenting on or even denies the possibility of rate cuts this year."
Crypto remains in its year-to-date uptrend. Its resistance level at between $28,800 and $29,000 could be a "tough ceiling to break" until Friday's PCE announcement, he added.
—CNBC's Gina Francolla contributed reporting
