Crypto asset prices experienced a marked increase on Monday as investors sought alternatives to stocks and bonds following the biggest banking crisis in the US since 2008.
Bitcoin rose from $20,577 to $24,060, a surge of more than 15 percent. Ethereum also saw an increase of over 9 percent, moving to $1,665, according to crypto website CoinDesk. Bitcoin’s price is now close to its 2021 high, although still far away from its 2020 or 2021 peaks, when it reached $67,553.
At first, the Silicon Valley Bank’s collapse was thought to be detrimental to the crypto industry, as many startups that focus on blockchain and digital currencies had deposits with the bank that could potentially be frozen or lost. Similar worries were expressed regarding Signature Bank, which failed over the weekend.
However, after the Biden administration guaranteed deposits in affected banks, confidence flooded back into the crypto market.
Signature Bank had been heavily involved in real estate lending, but had recently expanded its crypto-based lending operations. As of September, almost a quarter of its $89 billion deposits were from the cryptocurrency sector, Reuters reported. The bank announced in December that it would reduce its crypto-related deposits by $8 billion.
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The Federal Reserve’s Sunday announcement that it would ensure the safety of all depositors gave crypto enthusiasts the assurance they needed to push prices higher.
As bank stocks have slumped, cryptocurrencies have started to become more attractive again after what has been dubbed a “crypto-winter”.
SVB had become the 16th-largest bank in the US, although largely unknown to the public. The bank had enjoyed a boom during the pandemic, as tech startups flourished and people bought tech products from the comfort of their homes. SVB was used to hold the cash for these companies, a lot of which was used for payrolls and business expenses.
Investor and entrepreneur Anthony Pompliano said in a tweet: “Very clear signal from the market that a decentralized currency that allows you to become your own bank is valued in light of the recent developments.”
Neil Shearing, Group Chief Economist at Capital Economics, said in an email to Newsweek: “Two things will matter in the coming days and weeks. The first is whether the actions of the authorities are successful in maintaining (or restoring) the confidence of depositors and investors in the US banking system. The second issue is whether there are any other institutions with similar vulnerabilities to SVB (or Signature Bank) lurking in the shadows either in the US or in other economies.”
