Altcoins Jump As ‘Risk On’ Trading Takes Over Crypto

What happened

The stock market is up after Silicon Valley Bank (a subsidiary of SVB Finance Group) depositors were saved from potential losses, and that bullishness has spilled over into cryptocurrencies. Shares began to jump on Sunday afternoon and rose even more on Monday in a wild reversal of weekend losses.

Altcoins are up across the board, but there were some notable moves that led the market. GDP (BNB 9.56%) jumped as much as 10% in the past 12 hours from 15 ET, Cardano (ADA 7.08%) jumped 10.4% in the same period, and Filecoin (FILE 21.33%) rose 23.8% higher.

So what

The one move directly related to market news is BNB, which is up after Binance said it would convert $1 billion of a recovery fund into Bitcoin, Ethereum, and BNB. It is notable that it is buying BNB because it is Binance’s token. In a sense, Binance is using some of the funds to help its own token, which in turn helps the company look stronger.

Cardano gained some attention after founder Charles Hoskinson highlighted that banks have been riskier than holding crypto assets like stablecoins, which are backed by cash and government bonds. He wasn’t necessarily pointing out that cryptocurrencies are inherently safer than bank deposits, but rather that crypto hasn’t posed a systemic risk in the same way that more traditional products held by banks. And he has a point.

As a data storage tool, Filecoin could benefit from this bank run resulting in more people using cryptocurrencies. And it’s been one of the most volatile tokens in recent months, so it’s no surprise that a rebound in cryptocurrency values ​​is causing Filecoin to jump today.

What now

This could be a great opportunity for crypto and altcoins to prove their worth as better financial instruments than traditional banks. But it is not clear that is what will happen in the coming weeks or months.

Cryptocurrencies have faced their own liquidity and stability challenges and haven’t exactly proven to be more stable than traditional assets, or even a hedge against inflation. So I see some potential positives for crypto in the wake of the two bank collapses in the past week, but no clear path to bring in the next generation of users or developers.

I think today’s move was driven more by volatility and a sharp drop in interest rates this morning than any real news in crypto. The fall in rates has driven investors back to “risk assets,” or assets that are riskier but offer higher potential payouts over the long term in what’s known as a “risk on” trade. That is what we see today.

The question for investors is whether the bounce will last. I’m skeptical that the events of the past week will be bullish for cryptocurrencies in the long term. The industry is being pressured by American regulators, and if there is no clear alternative to the traditional banking system, the boom may disappear. But for today, investors are excited about crypto and altcoins again.