SVB, Signature Shutdowns Not Chilling Crypto

Regulators turn both off Silicon Valley Bank and New York-based Signature bank this week — not to mention the liquidation of Silvergate capital just last week – seemed like it would cause serious turmoil in the crypto market.

But if crypto has proven anything over the years, it’s that it will do the unexpected.

Bitcoin prices have risen nearly 25% since SVB’s problems came to light, while ether prices have jumped more than 20% in the same time period.

To be sure, SVB is the bank dominating headlines right now and is nowhere near as intertwined in the crypto market as Signature and Silvergate. Both of these banks had heavy crypto ties, with two of the largest 24-hour payment systems available to investors.

Still, SVB had both crypto startups and investors as depositors — with their money in limbo until banking regulators announced a plan Sunday to make them whole.

SVB played a role in perhaps the biggest crypt scare last weekend, then Circle — an issuer of the popular stablecoin USD Coin — announced that it had $3.3 billion committed to SVB.

A small panic gripped the industry, as USD Coin is a popular stablecoin for investors to park and store money in. The stablecoin – which is supposed to be pegged to the US dollar at a one-to-one rate – fell several cents below $1 .

But even this scare was short-lived – like other depositors, Circle had access to its funds on Monday – and crypto prices have remained robust.

The fall of SVB and the other banks may have actually led to a small increase in investor confidence in decentralized finance. Bitcoin was created because of the 2008 global financial crisis and people’s distrust of structured financial systems after all.

That confidence is not at its peak right now.

That doesn’t mean crypto is set to take off to November 2021 highs. Significant problems remain, such as large exchanges such as Coin base probably need to find some new banking partners.

The SVB bank run also illustrated what a liquidity crisis can look like – something crypto is still susceptible to.

The current crypto gains also appear to be bucking the trend of prices being correlated to the broader market – which seems unsustainable with so many major financial institutions active in crypto.

Nevertheless, at least for a moment, decentralized finance may show some of the promise it holds.