(Bloomberg) — Bitcoin experienced a 13% surge, the greatest single-day increase since the chaotic price swings in November, and shares of crypto companies rallied in the wake of steps taken by US authorities to counter the spread of fear concerning the condition of the nation’s financial system.
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The rally aided in extending the biggest cryptocurrency’s revival from its worst week in nearly four months, where a sell-off of stocks, worries in the banking sector, and an intensifying US regulatory crackdown on crypto all had a damaging effect on investor sentiment. The stablecoin USDC traded at par again with the dollar after detaching last week. Enhancing the optimism was the declaration by Binance that it would convert the remaining stablecoin funds from a $1 billion industry stability fund to Bitcoin, Ether, and its BNB token.
Binance’s action “helps the narrative that as faith in stablecoins diminishes, the true spirit of cryptocurrency is beginning to shine,” remarked Chris Newhouse, a crypto derivatives trader at crypto investment firm GSR. “Flows from stablecoins into the majors such as BTC and ETH are definitely an emerging theme.”
Bitcoin jumped 13% to $24,234 as of 5 p.m. in New York. The increase is the most notable since Nov. 10, when the collapse of FTX created a stir in markets. Over the weekend US agencies promised to completely protect all depositors’ money after the failure of Silicon Valley Bank on Friday, while the bank’s UK branch was sold to HSBC Holdings Plc for £1 on Monday morning.
At the same time Signature Bank — one of the most widely recognized US crypto-friendly banks left after Silvergate Capital Corp. closed down earlier this month — was shut by New York state financial regulators on Sunday with access to funds for depositors. The spate of bank closures had alarmed crypto markets, with several major crypto companies such as Circle Internet Financial, Coinbase Global Inc., and Paxos Inc. exposed.
Coinbase rose 11%, MicroStrategy Inc. rose 16%, and Marathon Digital Holdings Inc. soared 26%.
Gains among smaller cryptoassets known as altcoins were mostly lower, with Cardano up about 6%, and Tron increasing around 9%. Ether gained 7.4%.
SVB’s failure triggered a knock-on effect in crypto’s vital market of stablecoins after Circle, the operator of USDC, revealed it had $3.3 billion of reserves backing the token stored with the bank. Stablecoins are cryptocurrencies that aim to keep a one-to-one value with a less volatile asset like the US dollar, and are an integral safe haven for crypto investors aiming to maintain value without exiting into traditional currencies.
The news of SVB’s closure caused Circle’s USDC to slip far below its dollar peg — an event that’s the stablecoin equivalent of a money market fund breaking the buck — and sent a shock through the broader sector. By Monday morning, USDC had recovered to trade at par again.
“For crypto markets that means stablecoins are correcting and investors are now looking to hedge potential stagflationary forces by buying a range of assets, including BTC, ETH and altcoins alongside more traditional hedges such as gold and silver,” commented Darius Tabatabai, co-founder at decentralized exchange Vertex Protocol. “Given the headwinds faced over the last two years, this could be a major turning point for the space.”
The token’s depeg triggered a huge surge in volumes on decentralized exchanges on Saturday, thanks to its outsized prominence as a trading pair on such exchanges. Uniswap and Curve, the two leading decentralized exchanges, recorded their highest ever daily trading volume that day, based on data from DeFiLlama, with about $13.3 billion and $8 billion in volume respectively.
Curve’s 3pool, a liquidity platform that allows traders to swap three of the market’s top stablecoins like for like, accounted for $4.8 billion in trade volumes on Saturday. Users queued to swap USDC and DAI, a stablecoin backed by cryptoassets rather than actual dollars, for Tether’s USDT, the largest stablecoin by market circulation, after both USDC and DAI lost their dollar pegs over the weekend.
The total value locked in decentralized finance protocols has dropped nearly 10% in just a day to $38.6 billion, based on data from tracker DeFi Llama.
At the same time the dominance of Tether, the only stablecoin that’s benefitted from the ructions in crypto markets, has risen further as traders seek safety in the least-regulated token. Tether accounted for $72.3 billion of the $135 billion stablecoin universe as investors yanked $3 billion from rival USDC since Friday, according to crypto price data site CoinGecko.
“Bitcoin is greatly helped by intervention of SIVB and Signature,” Peter Tchir of Academy Securities stated. “Given the role the two banks and their customer base played in the crypto ecosystem, the fact that doubt has been minimized for both is improving sentiment.”
–With the assistance of Sidhartha Shukla, Eva Szalay, Vildana Hajric and Isabelle Lee.
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