Bitcoin BTC Price Rise to $24.5K Stemmed from Regulators’ Bank Interventions, Binance Stablecoin Conversion, Investor Hopes on Fed Dovishness

Bitcoin rose above $24,000 for the first time in over two weeks as investors breathed a sigh of relief after US regulators stepped in to support deposits at Silicon Valley Bank (SVB) and Signature Bank (SBNY), and became hopeful that the near collapse of the banking sector would lead the Federal Reserve to turn back its monetary hawkishness.

The largest cryptocurrency by market capitalization was trading as high as $24,574 on Monday afternoon, according to CoinDesk data — before recently retreating just above the $24,200 mark, still up more than 10% in the past 24 hours. BTC fell below $20,000 last Friday (UTC) as SIVB collapsed.

But a number of analysts said markets were boosted by regulators’ decisions late Sunday to bar depositors at crypto-friendly Signature Bank and Silicon Valley Bank. Earlier in the day, New York state’s top regulatory agency shut down Signature, saying it had “seized the bank to protect depositors.”

“The Fed bailout for depositors has eased some of the fears around contagion risk, resulting in a brief squeeze,” Martin Leinweber, product specialist for digital assets at MarketVector Indexes, told CoinDesk.

Monday’s surge caught traders betting on a price, forcing them to liquidate about $81 million of BTC short positions during the day. Leinweber noted that “most of these (positions were) placed on Friday when concerns were heightened.” These types of short squeezes tend to push prices higher.

In an email to CoinDesk, Joe DiPasquale, CEO of crypto-asset manager BitBull Capital, also said that “an outflow” from Circle’s USDC stablecoin to bitcoin and Binance’s decision to exchange stablecoins from its mining fund for bitcoin and ether also led to price increases.

Meanwhile, markets may have been encouraged by what some analysts believe will be a more dovish tone from the Federal Reserve, which has been stung by criticism in recent months that it raised interest rates too aggressively. On Sunday, Goldman Sachs analysts predicted no rate hike at the Federal Open Market Committee’s March 22 meeting after recent bank strains, according to a report.

Still, MarketVector’s Leinweber said that despite temporary relief, sentiment remains “concerned and cautious.” He sees concerns raised over “possible further bank fallout” and businesses that “are industry critical due to an inability to effectively manage cash flow.”

“Bears have voiced their major concerns, including that neither policy addresses the fundamental duration mismatch problem that many of these financial institutions have,” he said, adding: “The ability to borrow secured by the Fed at par (rather than at market rates ) only helps in an emergency situation and does not address the asset/liability mismatch and over-reliance on large zero-interest deposits.”

In an email to CoinDesk, Joshua Frank, co-founder and CEO of The Tie, a digital asset information services provider, struck a cautiously optimistic note.

“The loss of Silvergate, SVB and Signature is devastating for US-based crypto companies,” Frank wrote. “That said, at least temporarily, the crypto market has responded well to the bailouts. In light of the uncertainty surrounding banking in the United States, the narrative of Bitcoin as a hedge and security has gained momentum.”

Frank added: “While there are short-term positives, there are still many long-term macro factors to be wary of. US regulators are clearly trying to de-bank crypto, the macro environment is not looking good, and major financial institutions went under. If crypto – and Bitcoin in particular – is going to continue to recover, we will likely need to see broad support for this new narrative similar to what we saw in 2020/2021 with the Bitcoin halving/inflation hedge narrative.”

Ether (ETH), the second largest cryptocurrency, recently surged over 7% on Monday afternoon to change hands around $1,675. Layer 2 protocol Optimism’s original OP token rose 21% on Monday. LDO, the governing token of the Decentralized Autonomous Organization (DAO) behind the Lido floating stake system, gained 15%.

The CoinDesk Market Index, which measures the overall performance of the crypto market, was up over 10% for the day.

Stock markets were mixed on Monday afternoon: the S&P 500, Wall Street’s benchmark stock index, closed down 0.1%. The Dow Jones Industrial Average (DJIA) fell 0.2 percent, while the technology-heavy Nasdaq Composite rose 0.4 percent.

Investors will watch Tuesday’s release of February’s consumer price index.