Cryptocurrencies rebounded Monday after President Biden announced plans to limit the fallout from the collapse of two regional banks and the issuer of the USD Coin stablecoin said it remained redeemable with the dollar.
USD Coin, also known as USDC, recovered to $0.998, up from a record low of $0.87 hit on Saturday, far below its intended peg of 1:1 against the dollar.
The fall was sparked by concerns on the exposure of Circle — the US firm that issues USDC — to Silicon Valley Bank, which collapsed Friday in the biggest banking failure since the 2008 financial crisis.
But Monday, Bitcoin rallied nearly 10% to $24,300.40 to recovered from lows the token hit a day earlier.
The overall cryptocurrency market gained more than $105 billion in the 24 hours to 12 p.m. ET on Monday, propelling the market cap back above $1 trillion, according to CoinMarketCap.
Analysts, warned that market sentiment would remain skittish despite the U.S. measures.
“Markets remain unsettled from the SVB failure,” said Alvin Tan, head of FX strategy at RBC Capital Markets in Singapore. “The situation is evolving, but volatility looks set to remain elevated in coming days.”
Bitcoin rallied nearly 10% to more than $24,000REUTERS
The crypto reversal occurred after US officials launched emergency measures Sunday to shore up confidence in the banking system after the failure of SVB threatened to trigger a broader financial crisis.
Aside from SVB, New York’s chief financial regulator took possession of Signature Bank, a key banking firm for crypto companies. Those closures followed last week’s failure of Silvergate Capital, a significant lender to the cryptocurrency industry.
Crypto companies like Coinbase and Galaxy Digital aggressively cut ties with Silvergate after the company announced the liquidation of its bank and the winding down of its operations on Wednesday.
Follow The Post’s coverage of Silicon Valley Bank’s collapse
Both Silvergate and SVB put their money into the US Treasuries, which have lost value as the Federal Reserve has raised interest rates. These banks have been forced to sell these bonds at a loss to shore up their capital position.
In an effort to prevent any contagion generated by SVB’s disaster from spreading to the larger banking sector, regulators on Sunday stepped in and closed Signature Bank.
Customers line up outside of the Silicon Valley Bank Monday.REUTERS
“Thanks to actions we’ve taken over the past few days to protect depositors from Silicon Valley and Signature Banks, Americans can have confidence that our system is safe,” President Biden said Monday, restating that deposits will be there when they need them.
The market turmoil from the SVB collapse led investors to speculate whether the Fed will no longer raise interest rates by 50 basis points this month, according to CNBC.
The market is now pricing a nearly 60% chance of the Fed sticking to its current rate and around a 40% chance of a 25 basis point hike. Before the collapse of SVB, there was a 70% probability of a 50 basis point hike.
With Post wires