The total crypto market capitalization has once again surpassed $1 trillion. Following moves by US authorities to stem the spread of concern about the health of the nation’s financial system, Bitcoin climbed the most since November, and crypto company shares rallied.
As of 10:49 a.m. in New York, the largest crypto asset by market value increased by as much as 10% to $23,703. The increase is the greatest since November 10, when the collapse of FTX sent markets into a tailspin.
Following the collapse of Silicon Valley Bank on Friday, US agencies pledged over the weekend to fully protect all depositors’ funds, while the bank’s UK branch was sold to HSBC Holdings Plc for £1 on Monday morning.
Crypto markets defy the odds amid global market downturns
The repercussions of Silicon Valley Bank’s (SVB) failure could be significant, but it is too soon to tell. Stablecoins such as USD Coin and Dai losing their dollar pegs is never a good sign, but by March 12, they had recovered. However, it is unlikely that the Silvergate Bank scandal will cause lasting damage to the cryptocurrency industry.
The failure of the San Diego-based member bank of the Federal Reserve should be a minor event compared to the earthquake caused by FTX’s bankruptcy in November 2022. The implosion of FTX harmed dozens of crypto companies, including Silvergate Bank.
In contrast, the aftermath of the bank’s liquidation should be more manageable. It could even teach valuable lessons about diversification, a fundamental risk management principle often overlooked when markets soar.
An analyst stated that in the wake of Silvergate’s liquidation, some traditional banks may now close their doors to crypto accounts entirely. In contrast, others may severely limit their acceptance of crypto deposits. As their banking options become more limited, this will likely increase costs for U.S. crypto firms.
The crypto market performance today
The price of Ethereum rose on March 13 after U.S. regulators restored confidence in the banking sector, which had been shaken by the shutdown of Silicon Valley Bank (SVB) and Signature Bank, which had a combined market capitalization of $209 billion.
The price of Ether increased by more than 3% to approximately $1,635, its highest level in nearly two weeks. The gains were a part of the token’s broader uptrend, which saw it rally nearly 20% from its March 10 low of $1,369.
On March 12, the U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation assured SVB and Signature Bank depositors that their funds would be returned. In addition, the regulators noted that the U.S. government’s bank deposit insurance fund would cover all deposits instead of the standard $250,000 cap.
In addition, they pledged to launch a new $25 billion Bank Term Funding Program to provide short-term loans to banks that pledge U.S. Treasury securities, mortgage-backed securities, and other collateral.
The intervention halted the panic among depositors and aided the recovery of those markets that suffered last week due to fears of a wider banking contagion, including cryptocurrencies. Ether, the second-largest crypto by market capitalization, also recovered to reduce its March losses.
With Ethereum’s gains, Binance announced that it would convert its $1 billion “Industry Recovery Initiative” fund to Bitcoin, ether, and BNB. Coinbase Global Inc. increased by 5.7%, MicroStrategy Inc. increased by 14%, and Marathon Digital Holdings Inc. increased by 15%.
Most smaller crypto assets, known as altcoins, posted larger gains, with Cardano increasing by approximately 6% and Tron by approximately 10%. Bitcoin was recovering from its worst week since November, during which a selloff in equities, jitters in the banking sector, and an intensifying regulatory crackdown on cryptocurrencies in the United States combined to dampen investor sentiment.
USDC regains the dollar peg
According to CoinGecko, the USDC stablecoin regained its peg to the U.S. dollar. This is after falling below the $1 value it was supposed to hold. Additionally, federal banking and finance regulators announced Sunday that all Silicon Valley Bank depositors would be refunded and have access to their funds on Monday.
The USDC fell to as low as 86 cents at times, a staggering decline for the world’s second-largest stablecoin. However, by Saturday midday, it had begun to recover somewhat.