The Fed and the FDIC have assured depositors that they could withdraw money from Silicon Valley Bank thereby instilling some confidence among crypto investors.
In the early trading hours on Monday, March 13, the broader cryptocurrency market made a strong comeback surging past $1 trillion levels once again. This surprise rally in the crypto space came as the top three US regulators – the Federal Reserve (Fed), US Treasury, and FDIC – stepped in to control the unfolding crisis in the US banking sector. Earlier last week, the Silvergate Bank announced a shutdown following major liquidity issues.
Fed and FDIC Want to Rescue SVB Depositors
Later on Friday, March 10, the Silicon Valley Bank announced a shutdown in one of the biggest banking failures after the 2008 financial crisis. The SVB has its money in the US Treasuries which lost their value as the Federal Reserve raised interest rates. In order to shore up their capital position, these banks have been forced to sell these Treasury bonds at a loss.
Later on Sunday, March 12, the US regulators announced the closure of Signature Bank to prevent any spread of contagion into the broader banking sector. This move from the regulators to create a backstop for SVB and protect the depositors have boosted investor confidence.
On Sunday, all three regulators issued a joint statement noting that the depositors at SVB will have access to all of their money. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the regulators said. Speaking on the development, Vijay Ayyar, vice president of corporate development at crypto exchange Luno, told CNBC:
“Given the Fed announcement over the weekend of a backstop for banks and specifically Silicon Valley Bank, markets have turned euphoric knowing that depositors’ money is safe and a major potential bank run has been averted”.
Bitcoin and Altcoins Rally
The crypto market has responded pretty well to Fed’s corrective measures by registering a sharp rally earlier today. Along with Bitcoin (BTC), altcoins have done pretty well with the Ethereum (ETH) price shooting over 9% and surging past $1,600 levels.
Other lead gainers in this crypto market bounce back are: BNB Coin gaining over 8% and surging past $300, Cardano (ADA) gaining over 9% to trade at $0.3319, Solana (SOL) gaining over 8% and a move over $20.
While the crypto market has shown early confidence, it will be interesting to see how Wall Street reacts going ahead in Monday’s trading session. All further moves in crypto will depend on how US equities react.
Currently, the Dow Jones Futures has dropped by 1.07% slipping under $32,000 levels. The S&P 500 futures, however, are in the green.