Today, Bitcoin and other cryptocurrencies saw a price surge following the announcement of measures to limit the fallout from the collapse of Silicon Valley Bank (SVB) by the US Treasury and Federal Reserve. As depositors were assured access to their deposits today, cryptocurrency firm Circle reassured investors that its peg was secure. The events come shortly after authorities seized control of Signature Bank, the second banking failure in a matter of days.
Stablecoin USDC, which had dropped below its 1:1 dollar peg and hit a record low on Saturday amid worries over the exposure of Circle— the entity backed by USDC—to Silicon Valley Bank, has recovered. At the time of writing, it was trading at $0.9917, significantly closer to parity than before, having recovered from last week’s lows of around $0.88. In a tweet, Circle CEO Jeremy Allaire assured investors their $3.3 billion USDC reserve deposit held at the now-defunct Silicon Valley Bank would be available when American banks open today.
According to Circle CEO Jeremy Allaire, Circle’s USDC operations are set to open with the launch of its new automated settlement system powered by its partnership with Cross River Bank. Since Sunday, Bitcoin has seen an 8% surge in value, trading at around $22,568. In addition, the New York State Department of Financial Services announced that Signature Bank depositors who closed on Sunday would be fully reimbursed at no cost to taxpayers. Signature Bank had a large pool of clients from the tech sector, and its securities experienced losses due to rising interest rates.
As of September, signature Bank had welcomed an influx of deposits from the cryptocurrency sector, making up nearly a quarter of its total deposits. However, the bank reduced these crypto-related deposits by $8 billion in December. Despite this move, analysts remain wary about market sentiment in light of recent events such as the SVB failure. Alvin Tan, head of FX strategy at RBC Capital Markets in Singapore, said: “Markets remain unsettled from the SVB failure.”
The market has been roiled by Signature Bank’s collapse, diverging from the rising Federal Reserve rate path expectations. This significant event has caused continued volatility in the near future. Despite this, crypto exchange Bitstamp is continuing to operate normally. In response to these changes, Binance has converted its $1 billion Industry Recovery Initiative (IRI) fund from BUSD to native cryptocurrencies such as Bitcoin, Ethereum, and Binance Coin. Binance launched the IRI in November to help crypto projects that suffered liquidity issues following FTX’s collapse.
