Crypto Markets Rally on FDIC Banking Intervention, USDC Recovers Dollar Stick
by Arthur · March 14, 2023
The market cap for all cryptocurrencies is back above $1 trillion.
After a joint statement from The Federal Reserve, the US Treasury, and the FDIC declared that all depositors were now closed Silicon Valley Bank and Signature Bank will be able to withdraw their money on Monday, the battered crypto market turned green.
Late Sunday night, Bitcoin (BTC) was up to $22,300 and Ethereum (ETH) was at $1,596, both up around 8% in the past 24 hours, according to CoinMarketCap price data.
Top 30 coins Cardano (ADA), Polygon (MATIC), Solana (SOL), Litecoin (LTC), Avalanche (AVAX) and Filecoin (FIL) were also up by more than 10%.
Conversely, the news appeared to cause hesitation in traditional financial markets, with the US dollar falling in early Monday trading.
The US Dollar Coin (USDC), the market’s No. 2 stable coin, regained its dollar peg, returning to a price of 99.3 cents on several price indices. USDC had plunged to a new all-time low of 87 cents on Friday night after USDC issuer Circle revealed it still had $3.3 billion of the cash reserves backing USDC at Silicon Valley Bank.
The decline over the weekend shook confidence in USDC and other stablecoins such as USDD, USDP, and cast doubt on the viability of stablecoins in general. It is not yet certain that this doubt has been put to rest just because the USDC has recovered.
The current banking chaos and contagion arguably began barely more than a week ago when crypto-friendly Silvergate Bank showed signs of trouble. After many crypto companies that used Silvergate (including Coinbase, Galaxy, Gemini and Crypto.com) said they would stop using it, Silvergate shut down the Silvergate Exchange Network. By Wednesday, Silvergate said it would wind down the business.
Just two days later, on Friday, Nasdaq halted trading in Silicon Valley Bank, which experienced a $42 billion bankruptcy the previous day and was reportedly seeking an emergency buyout. Within hours, regulators had shut down SVB, sending banking and technology stocks taking a dramatic hit amid fears that other regional banks would be in trouble. Several crypto and technology startups publicly announced whether they had money in SVB. Then on Sunday, New York state financial regulators abruptly shut down Signature Bank, citing systemic risk.
Finally, Sunday night’s announcement of assistance from the Fed, Treasury and FDIC appears to have stopped the bleeding in crypto and stocks for now: S&P and Nasdaq futures rose sharply in premarket trading.
