Bitcoin Surges As Bank Contagion Fear Ebbs
By Laxmikant Khanvilkar
Cryptocurrencies stood strong for a second straight session as the Federal Reserve stepped in to prevent bank contagion.
The Fed bailout for depositors has alleviated some of the fears surrounding contagion risk, which resulted in a short squeeze, a digital asset expert said.
In fact, several analysts said that markets were buoyed by the regulators’ decisions late Sunday to protect depositors at crypto-friendly Signature Bank and Silicon Valley Bank. Earlier in the day, New York state’s top regulatory agency shuttered Signature, saying that it had “taken possession of the bank to protect depositors.”
Bitcoin surged above $24,000 for the first time in over two weeks as investors exhaled after U.S. regulators stepped in to back deposits at Silicon Valley Bank (SVB) and Signature Bank (SBNY), and grew hopeful that the near meltdown of the banking sector would prompt the Federal Reserve to ratchet back its monetary hawkishness.
The largest cryptocurrency by market capitalization traded as high as $24,574 Monday midday. It last hovered above $24,200, still up over 10% over the past 24 hours.
The global crypto market capitalization has increased to $1.07 trillion, a rise of 5.45% over the previous day. The 24-hour trading volume has also increased substantially, reaching $95.63 billion. Decentralized finance (DeFi) currently makes up 8.76% of this total volume, with stable coins accounting for 97.07%. Bitcoin’s market dominance is 43.49%, representing a 1.28% growth over the last day.
Ether, the second-largest cryptocurrency, recently rose by over 7% to change hands around $1,675.
Cryptocurrencies have also benefited from “an outflow” from Circle’s USDC stablecoin to bitcoin and Binance’s decision to exchange stablecoins from its recovery fund to bitcoin and ether also led to price increases.
Meanwhile, markets may have been encouraged by what some analysts believe will be a more dovish tone from the Federal Reserve, which has been stung by criticism in recent months that it was raising interest rates too aggressively. On Sunday, Goldman Sachs analysts forecast no rate hike at the Federal Open Market Committee’s March 22 meeting after recent banking stresses, according to a report.
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