Bitcoin explodes to $22,000 as Biden administration tries to stop contagion in US financial system
Bitcoin (BTC) price soars as Biden administration scrambles to prevent Silicon Valley Bank collapse from triggering mass exodus at regional banks across US
The US Treasury Department is holding a series of emergency meetings to decide whether to ensure that all depositors at SVB are made whole after the bank’s sudden collapse, the Washington Post reports.
The outlet cited people with knowledge of the matter as talking about internal deliberations at the Treasury Department, the Federal Reserve and the FDIC.
“Federal authorities are seriously considering protecting all uninsured deposits at Silicon Valley Bank, and are weighing an extraordinary intervention to prevent what they fear would be a panic in the US financial system.”
An abrupt, widespread realization that US bank accounts, including business accounts, are only insured up to $250,000 by the FDIC has coincided with a sharp reversal in the price of BTC.
Bitcoin has risen from a 24-hour low of $20,334 to a high of $22,111 – an increase of 8.7%.
The pseudonymous creator of Bitcoin, who went by the name Satoshi Nakamoto, explicitly created the original cryptocurrency as a response and alternative to the modern banking system.
Bitcoin was born out of the 2008 financial crisis, which was the last time US banks and financial institutions crumbled at the expense of everyday citizens.
In creating the world’s first cryptocurrency, Nakamoto aimed to create a monetary system with an inherently scarce supply backed by a transparent and verifiable means of processing and validating transactions without the need for a bank or intermediary.
Bitcoin’s inventor explicitly described his, her, or their creation as an antidote to the modern financial system.
“The root problem with conventional currency is all the trust required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is littered with breaches of that trust. The banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust our privacy, trust that they won’t let identity thieves tap our accounts. Their huge fixed costs make micropayments impossible…
With e-currency based on cryptographic proof, without the need to rely on a third-party intermediary, money can be secure and transactions hassle-free.”
The crypto industry is battling its own problems with the banking system following the collapse of crypto-friendly bank Silvergate.
That bank cited regulatory pressure and “recent industry developments” as the reason it decided to close its doors.
Silvergate’s shutdown triggered last week’s decline in crypto markets, and the fall of Silicon Valley Bank also had direct implications for the industry.
Circle, the company behind stablecoin USDC, revealed that it has $3 billion of its $40 billion in reserves in Silicon Valley Bank. The revelation led to a crash in the price of USDC, which fell as low as $0.84 and is now trading at $0.95 at press time. The company says it will use its own resources and internal capital to cover the losses.
The CEO of the world’s largest crypto exchange by volume, Changpeng Zhao, warns that any stablecoin tied to the US banking system could face similar problems in the future.
Bitcoin is trading at $21,884 at press time, up 7.6% in the last 24 hours.
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Featured Image: Shutterstock/Liu zishan/CHIARI VFX
