stub Market Awakens Following SVB Bail Out: Bitcoin Reclaims $22K, Ether Challenges $1,600 as USDC Closes in on Repeg - Securities.io
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Market Awakens Following SVB Bail Out: Bitcoin Reclaims $22K, Ether Challenges $1,600 as USDC Closes in on Repeg

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Bitcoin on cash

The crypto market set off on a chaotic note in the second week of March, deteriorating later into the week and further going into the weekend before recovering sharply on Sunday.

Growing tensions in the market and investor uncertainty arising from midweek reports of crypto banks being in dire straits sent prices across the board on a slump. Silicon Valley Bank (SVB) on Mar 10 followed Silvergate as the next banking institution to join the list of struggling crypto companies. The California-based bank spiraled violently into the ground on Thursday and Friday, shaking the entirety of the crypto market.

Silvergate, on the other hand, discontinued the Silvergate Exchange Network last week before conveying that it had decided to wind down operations and liquidate to pay back its depositors. SVB's collapse came on the back of attempts to raise capital for customers who were withdrawing funds in mass at the time through the sale of its held assets and stocks on Mar 8. The developments alarmed investors as the market reaction escalated, resulting in a contagion that prompted the state financial watchdog to step in. The California Department of Financial Protection and Innovation confirmed it took over the institution on receivership terms.

The crash sent Bitcoin price to its mid-January levels and the total crypto market capital below $1 trillion, erasing a significant chunk of accrued gains. The crypto market has regained momentum in the last few hours, soaring to pre-SBV-collapse levels.

Ripple discloses exposure to SVB collapse, declares solid financial position

In a Mar 13 tweet, Ripple CEO Brad Garlinghouse revealed that the blockchain company had funds in SBV, but the amount is insignificant in the context of disrupting its position. Garlinghouse's remarks, which came hours before the Federal Reserve and other agencies jointly announced a funding program to support financially-stressed banking firms, didn't include any specifics regarding figures. The Ripple exec, however, assured the firm's stability and daily operations remain unaffected.

Federal agencies step in to save Silicon Valley Bank and its depositors

US multi-agency officials conveyed in a joint message on Sunday that, in consultation, the Biden administration resolved to save SVB from drowning and establish a funding program to safeguard depository firms and other banking institutions like credit unions and savings associations. Key figures involved in the decision include US Treasury Secretary Janet Yellen, Federal Deposit Insurance Corporation chair Martin Gruenberg and Fed chair Jerome Powell. Firms deemed eligible under the $25 billion funding program will have access to funds to meet customers' obligations in times of liquidity crisis.

“These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy.”

The joint statement explained that the newly set up fund would offer loans in the form of an “additional source of liquidity” as a temporary fix “in times of stress” to troubled banking firms against pledged US Treasuries and other assets that will be accepted as collateral.

Strengthening public confidence in the banking system

The intervention of federal officials to backstop billions of dollars in uninsured money came as a welcomed surprise to depositors, marking the first ever such emergency measure from the Biden administration. The federal regulators, in another statement, confirmed that Silicon Valley Bank depositors would have access to all of their funds starting Monday.

“Depositors will have access to all of their money starting Monday, Mar 13 […] No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the joint statement read.

The heads of the federal agencies additionally communicated that deposits would be available to customers of Signature bank. The latter received orders to cease operations from New York's state chartering authority on Sunday.

We are also announcing a similar systemic risk exception for Signature Bank, closed today by its state chartering authority. All depositors of this institution will be made whole […] Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks.”

In addition to staunching the market bleed, the update from the federal officials has turned the market green on the day.

Bitcoin and alts jump double-digits, USDC stablecoin its way to reclaim dollar peg

Overlooking the relative gains, the USD coin has stood out as the biggest beneficiary of the Fed announcement in the market by accelerating its flight towards the $1 mark to reattain its lost peg. The stablecoin‘s bounce from its lowest over the weekend, $0.87, has been bolstered by positive developments around Circle's reserves that were held at Silicon Valley Bank, totaling $3.3 billion. CEO Jeremy Allaire assured that reserves were safe, adding that the stablecoin issuer plans to “bring on a new transaction banking partner with automated minting and redemption potentially” on Monday. USDC was, at the time of writing, trading at $0.992. Bitcoin and Ethereum have jumped double digits to around $22,300 and $1,600 at press time, respectively.

The rest of the crypto market, too, has rallied on the combination of the latest positive news. Synthetix (SNX) and Conflux (CFX) lead among top gainers – up 29% and 28% in the last 24 hours. Maker (MKR), Optimism (OP) and Render Token (RNDR) have also printed major green candles. Meanwhile, the total liquidated trade orders in the last 24 hours, as per Coinglass, totals $211 million – 84% accounted by shorts.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.