Bitcoin retreats as US freezes deposits at crypto-linked banks

Bitcoin and Ether led the top 10 non-stablecoin cryptocurrencies to rally in morning trading in Asia as US banking regulators took control of Silicon Valley Bank and Signature Bank, both with ties to the crypto industry, guaranteeing deposits at the institutions as well as further backstops for the banking industry . The moves followed the failure of Silvergate Capital last week which raised the threat of a systemic run on the banks. Solana led the gains.

See related article: Kryptobank Silvergate closes, returns all deposits; will be the last victim of cryptouro in 2022

Fast facts

• Bitcoin jumped 9.60% in the past 24 hours to $22,601 at 09:00 in Hong Kong, according to CoinMarketCap data. Ether rose 9.77% to $1,621.
• Solana rose 12.85% to $20.38 to lead the gainers, but still has more ground to make up as it is down 2.93% in the past seven days.
• USD Coin (USDC), the second-largest stablecoin by market capitalization, traded back in line with its US dollar peg in Asia on Monday morning after losing its peg shortly after the failure of Silicon Valley Bank, which holds about US$3 billion in deposit, according to Circleissuer of USDC.
• USDC fell to $0.8774 on Saturday and its market cap fell 15% to $36 billion from $43 billion. Circle said the same day that the company had the funds to support USDC and that it would remain redeemable 1 for 1 with US dollars. USDC was recently traded at USD 0.9941.
• Circle Chief Jeremy Allaire so on Monday that all Circle deposits will be available when banks open on Monday.
• The total crypto market capitalization rose 6.47% in the last 24 hours to $1.01 trillion. Total trading volume in the last 24 hours was down 34.52% to USD 60.19 billion.
• US stocks fell on Friday. The Dow Jones Industrial Average fell 1.07%, the S&P 500 fell 1.45% and the Nasdaq Composite Index fell 1.76%.
• The decline in stocks followed the collapse of Silicon Valley Bank, which was taken over by the FDIC on Friday, in the biggest US bank failure since 2008. However, US stock futures were trading higher on Monday morning in Asia, reflecting moves to backstop the US banking industry.
• Amid banking panics, investors struggled with a jobs report from the Labor Department on Friday that showed nonfarm payrolls in February came in at 311,000, beating the forecast of 225,000. This furthers the narrative that the Federal Reserve may raise interest rates more than previously expected to curb inflation.
• But with bank failures now the center of attention and concern, analysts at CME Group are predicting a 17.4% chance of a 50 basis point increase this month, down sharply from 60.9% last Friday. This reflects a view that the Fed is unlikely to raise interest rates that much amid a series of bank failures.
• CME expects an 82.6% chance the Fed will raise rates by the projected 25 basis points this month, but other commentators say the Fed could delay any rate hike until next month due to banking industry jitters.
• The Fed meets on March 22 to make its next decision on interest rates, which are currently between 4.5% and 4.75%, the highest since October 2007.
• The US annual inflation rate is 6.4% for the year ending January 2023, according to Labor Department data released on February 14, which is well above the Fed’s long-term goal of keeping inflation in a 2% band. The next inflation update is scheduled for 14 March at 8:30 a.m. Eastern Standard Time.

See related article: Weekly Market Wrap: Bitcoin Falls Below $20,000 as Silvergate Collapses, Interest Rate Hike Concerns Rise