Cryptocurrencies surged on Monday, even after regulators Sunday announced the closure of Signature Bank, the last major crypto bank in the U.S.
Bitcoin rose more than 15% to $24,382.98, according to Coin Metrics, and is now about 19% above its Friday levels. Since the January rally in risk assets began to fizzle out, chart analysts have been looking for a meaningful break above $25,000.
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Ether rose 9% to $1,683.20.
The jump in risk assets came after U.S. regulators announced plans Sunday night to backstop all the depositors in failed Silicon Valley Bank and make additional funding available for other banks.
Investors were also betting Monday that the Fed will be less aggressive in raising interest rates now that authorities have stepped in to limit the fallout from SVB and Signature.
Crypto initially moved higher amid a broader rally in risk assets. The Dow Jones Industrial Average and S&P 500 eventually turned lower and ended the day in the red, the tech-heavy Nasdaq Composite finished on an up note, however.
“A slower hiking pace and a lower terminal rate, plus the likely injection of liquidity to prop up banks struggling to meet withdrawals (through the Bank Term Funding Program) imply greater market liquidity, even if this could be partially offset by higher volatility,” said Noelle Acheson, economist and writer of the “Crypto is Macro Now” newsletter.
“Bitcoin is one of the most sensitive assets to market liquidity, since its ‘risk’ profile is unencumbered by earnings or ratings concerns,” she said.
The last major crypto bank
The Treasury, Federal Reserve, and FDIC disclosed in Sunday’s joint statement that Signature Bank was closed the same day, in a bid to prevent the spreading banking crisis.
“Both banks had little diversification,” Sylvia Jablonski, CEO and chief investment officer of Defiance ETFs, said of Signature and Silicon Valley Bank. “With high risk often comes high reward, however, if the balance sheet behind the system crashes – while you have a Fed removing liquidity from the system and hiking rates – crypto startups and venture capitalists may have a long road to recovery.”
“It is a complex matter in the near term,” she added. “News of the Fed creating a backstop helped to bolster equities and crypto overnight, however, as panic sets in we will have to see how today’s market holds up.”
Crypto prices rose Monday in the face of that closure, despite it adding to fears by crypto investors and entrepreneurs that regulators are crushing the industry by pressuring banks to cut off their businesses.
Signature Bank was another famously crypto-friendly institution and the next biggest one next to Silvergate, which announced its impending liquidation last week. Wall Street analysts Friday had maintained buy ratings on Signature Bank, even as the bad news around Silvergate and SVB unfolded.
The end of the Silvergate-Signature duo leaves crypto with few “on-ramps” that allow fiat money to flow into crypto assets. They helped solve this problem by creating easy banking services and payment platforms for crypto companies; namely, the Silvergate Exchange Network and Signature’s Signet platform.