BTC Quickly Recovers After SVB and Silvergate Panic
Following the crisis at the Silicon Valley Bank (a crisis that eerily coincided with Silvergate’s own), increased uncertainty and fears of a snowball effect led to traders dumping risky assets.
However, the swift action taken by regulators has prevented the crisis from mutating into a disaster, and things seem to be looking up.
Bitcoin corrected to $20,000, recording a multi-month low of $19,600 before positive news related to SVB saw the BTC price recover. At the time of writing, Bitcoin trades at $22,500 with a view of recapturing the 20-day EMA and subsequently the 50DMA.
This is a positive sign; the FTX crisis had plunged the crypto markets into a general malaise, but that’s not the case this time. Bulls are buying at lower levels, and we could see further upside in the coming sessions.
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Everything You Need to Know About Silicon Valley Bank’s Collapse
Last week, the Silicon Valley Bank was shut down by the California Department of Financial Protection and Innovation. But why?
Prior to closure, the bank’s parent company, SVB Financial Group, announced the sale of $21 billion in securities from its portfolio and revealed plans to hold a $2.25 billion share sale to bolster its finances.
The reason: high deposit outflows due to a broader malaise in the startup world and projections of a sharper decline in net interest income.
This resulted in prominent investors advising their portfolio companies to limit their exposure to SVB and withdraw their funds from the bank. Other VC firms suggested that their portfolio companies shift some of their funds away from SVB.
Subsequently, SVB’s stock tanked by 60%. In the crypto world, SVB’s collapse primarily affected the USDC stablecoin. Circle, the organization behind USDC, had $3.3 billion in SVB, and the news saw USDC depegging and losing 10% of its value. For a couple of days, this caused panic in the DeFi industry as fears of contagion mounted.
However, on March 12, U.S. federal regulators announced that depositors at SVB would not bear the brunt of the collapse and that they would be fully protected. The Fed announced a $25 billion fund to help backstop banks facing liquidity issues. Furthermore, the Bank of London made a formal bid for the UK branch of SVB.
As the positive news trickled in, USDC regained its dollar peg. CEO Jeremy Allaire confirmed that Circle’s reserves are safe and the firm already has new banking partners.
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