Bitcoin, Coinbase, Key Stablecoin Rally on Banking Crisis Intervention
The price of cryptocurrency Bitcoin jumped 10% while Coinbase Global (COIN) rallied on Monday amid efforts by US authorities to prevent a banking crisis from spreading to the wider economy.
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Meanwhile, the issuer of the USD Coin Stablecoin said it remained redeemable with the dollar.
Federal and state regulators in New York shut down Sunday Signature bank (SBNY), which connected crypto firms to the traditional financial system. The New York bank’s depositors will be made whole, officials said.
Bitcoin: Signature bank falls victim to crisis
Shares in Signature Bank fell 38% last week. The collapse of crypto-friendly Silvergate Capital had pressured Signature Bank even before the Silicon Valley Bank crisis emerged late last week. Silvergate helped institutional investors move dollars in and out of crypto trading platforms
While depositors at Silicon Valley Bank of Santa Clara, Calif. and Signature Bank will be protected, “stockholders and certain unsecured debt holders” will not be bailed out, the U.S. Treasury Department and the FDIC announced.
Shares in Coinbase rose 5.8% on Monday. The crypto firm had revealed that Signature had $240 million in Coinbase cash.
Coinbase on Twitter said they expect to “fully recover these funds.”
Meanwhile, US regulatory moves have also bolstered Circle Internet Financial. Silicon Valley Bank had $3.3 billion in reserves for USD Coin, or USDC, a stablecoin pegged to the U.S. dollar. According to Circle Internet, the $3.3 billion will now be “fully available.”
Stablecoin value returns
After falling to 86 cents on Saturday, USD Coin returned to near the $1 peg on Monday.
Mizuho Securities, in a research note published on Monday, said: “USDC revenue is critical to COIN, accounting for approximately 80% of interest revenue and 23% of total revenue in Q4.”
No USDC cash reserves were held at Signature Bank.
Crypto traders rely on stablecoins to enter or exit their positions in more volatile cryptocurrencies, while companies often store capital and profits in stablecoins.
Meanwhile, the price of Bitcoin remains volatile. Bitcoin fell below $20,000 on Friday. While Bitcoin rallied on Monday, it remains below the February 21-22, 2023 high near $25,000.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cyber security and cloud computing.
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