Bitcoin Leads Crypto Rebound After SVB Collapse Triggers Selling

Business

Of Yuheng Zhan

March 13, 2023 | 16:45

Cryptocurrencies rallied on Monday after President Biden announced plans to limit the fallout from the collapse of two regional banks, and the issuer of the USD Coin stablecoin said it could still be redeemed for dollars.

USD Coin, also known as USDC, recovered to $0.998, up from an all-time low of $0.87 on Saturday, well below its intended 1:1 peg against the dollar.

The fall was triggered by concerns about the exposure of Circle – the US firm that issues USDC – to Silicon Valley Bank, which collapsed on Friday in the biggest bank failure since the 2008 financial crisis.

But on Monday, Bitcoin rallied nearly 10% to $24,300.40 to recover from the token’s lows a day earlier.

The total cryptocurrency market gained more than $105 billion in the 24 hours to 12 p.m. ET on Monday, pushing its market capitalization back over $1 trillion, according to CoinMarketCap.

Analysts warned that market sentiment would remain ailing despite US measures.

“Markets remain uncertain due to the SVB failure,” said Alvin Tan, head of foreign exchange strategy at RBC Capital Markets in Singapore. “The situation is evolving, but volatility looks set to remain high in the coming days.”

The crypto reversal came after US officials launched emergency measures on Sunday to bolster confidence in the banking system after the SVB failure threatened to trigger a wider financial crisis.

Apart from SVB, New York’s financial regulator took possession of Signature Bank, a key banking firm for crypto companies. These closures followed last week’s failure of Silvergate Capital, a major lender to the cryptocurrency industry.

Crypto companies such as Coinbase and Galaxy Digital aggressively cut ties with Silvergate after the company announced the liquidation of the bank and the liquidation of its business on Wednesday.

Follow The Post’s coverage of Silicon Valley Bank’s collapse

Both Silvergate and SVB put their money into US Treasuries, which have lost value as the Federal Reserve has raised interest rates. These banks have been forced to sell these bonds at a loss to strengthen their capital position.

In an effort to prevent any contagion generated by SVB’s disaster from spreading to the larger banking sector, regulators on Sunday stepped in and shut down Signature Bank.

“Thanks to actions we’ve taken in recent days to protect depositors from Silicon Valley and Signature Banks, Americans can have confidence that our system is safe,” That’s what President Biden said on Mondaywhich reiterates that deposits will be there when they need them.

The market turmoil from the SVB collapse led investors to speculate whether the Fed will no longer raise interest rates by 50 basis points this month, according to CNBC.

The market is now pricing in a nearly 60% chance of the Fed keeping rates at its current rate and about a 40% chance of a 25 basis point hike. Before the collapse of SVB, there was a 70% probability of a rise of 50 basis points.

With Post wires