Bitcoin, USDC stablecoin rally after US intervenes on SVB

SINGAPORE, March 13 (Reuters) – Bitcoin and other cryptocurrencies rallied on Monday after the U.S. government announced plans to contain the fallout from the collapse of Silicon Valley Bank (SVB) and as cryptocurrency firm Circle reassured investors that the link was secure.

The U.S. Treasury Department and Federal Reserve announced a series of measures to stabilize the banking system and said depositors at SVB ( SIVB.O ) would have access to their deposits on Monday.

The moves came as authorities seized New York-based Signature Bank ( SBNY.O ), the second bank failure in days.

Stablecoin USD Coin (USDC), which had lost its 1:1 dollar peg and hit a record low on Saturday amid concerns over the exposures of Circle, the firm behind USDC, to Silicon Valley Bank recovered. It was at $0.9917, closer to par and up from last week’s low around $0.88.

Circle CEO Jeremy Allaire said in a tweet that the 3.3 billion USDC reserve deposit held at the collapsed Silicon Valley Bank ( SIVB.O ) will be fully available when U.S. banks open on Monday.

“Circle’s USDC operations will open for business, including with new automated settlements via our new partnership with Cross River Bank,” Allaire said.

Bitcoin was up about 8% from Sunday’s low, trading at $22,568.

U.S. officials said depositors of New York’s Signature Bank ( SBNY.O ), which was shut down on Sunday by the New York state financial regulator, would also be made whole with no loss to taxpayers.

Signature, like SVB, had a clientele concentrated in the technology sector, and the securities on its balance sheet had eroded as interest rates rose. As of September, nearly a quarter of Signature’s deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.

However, most analysts cautioned against assuming that all is well with market sentiment following these measures.

“Markets remain uncertain due to the SVB failure,” said Alvin Tan, head of foreign exchange strategy at RBC Capital Markets in Singapore.

“The market turmoil triggered by the SVB has nullified the rising market expectations on the Fed rate path. The situation is evolving, but volatility looks set to remain high in the coming days.”

Crypto exchange Bitstamp, meanwhile, said it would continue to operate normally, despite Signature Bank’s failure.

Major exchange Binance said it would convert the remainder of a $1 billion industry recovery initiative fund from its BUSD stablecoin into native cryptocurrencies such as bitcoin, ether and Binance Coin, CEO Changpeng Zhao said in a tweet on Monday, citing recent changes in stablecoins and the banking industry.

Binance launched the Industry Recovery Initiative (IRI) in November to help crypto projects facing a liquidity crisis following the collapse of rival FTX.

Additional reporting by Shubham Kalia and Baranjot Kaur in Bangalore Editing by Kim Coghill and Jacqueline Wong

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