Why Bitcoin, Ethereum and Dogecoin emerged on Friday

What happened

The fallout from last weekend’s bank collapses has extended further into the regional banking sector this week, helping cryptocurrency values. Bank collapses seem to make the case for crypto more than any other event could have.

Bitcoin (BTC 7.04%) has jumped 7% in the last 24 hours from 11:20 a.m. ET, Ethereum (ETH 4.16%) is up 4%, and Dogecoin (DOGE 4.10%) has risen 4.8 percent.

So what

After working for months to undermine cryptocurrencies and prevent banks from keeping cryptocurrencies on their balance sheets, Silicon Valley Bank (part of SVB Finance) and Signature bank has shown that crypto may not have been the most important risk in banking. The risk that rising interest rates made up the value of long-term bonds brought these banks down.

Depositors were saved in the case of these two banks, and First Republic received an infusion of $30 billion in deposits today to prop up the bank, but Treasury Secretary Janet Yellen did not say all bank deposits would be guaranteed.

This raises the question of how safe deposits above $250,000 are in the US banking system outside of systemically important banks. So what options are there?

One answer is cryptocurrencies, which can be held in self-custody through a hardware or software wallet. It’s the modern equivalent of putting money under your mattress, and it seems that’s what some investors are doing today.

Cryptocurrencies are up across the board, but there seems to be a flight to safety, with Bitcoin and Ethereum in particular bidding up today.

What now

Whether the current banking crisis makes cryptocurrencies more viable as a way to store value or money is not yet known. But traders are currently better than blockchain can actually address some of these risks.

Remember that the crypto industry has survived the collapse of a highly leveraged hedge fund and an exchange that committed fraud. These would be extinction-level events in banking, but Ethereum, Bitcoin and even Dogecoin have held their own.

To be clear, crypto is not ready to become the banking epicenter of the world, but there may be a clearer case for self-storage and digital assets playing a role in the economy than it was just a few weeks ago. The well-known cryptocurrencies rise to that task.

What I would caution is that this bounce may not be sustainable. Regulators may come up with a more permanent solution to the kind of bank run we saw last week, and I’m also not sure that cryptocurrencies that can handle a few transactions per second will ever be used on a widespread basis.

Stablecoins on fast, cheap blockchains are more likely to pose a challenge to traditional banks. It’s the kind of disruption that will help cryptocurrencies, but it will also take years to play out.