Major cryptocurrencies stabilized after US authorities announced plans to limit the effects of the collapse of Silicon Valley Bank (SVB), and the issuer of the stablecoin USD Coin said, that its rate will continue to stay at $1 per coin, reports Reuters.
On Sunday, US authorities launched emergency measures to shore up confidence in the banking system after SVB’s bankruptcy threatened to deepen the financial crisis, and said SVB customers would have access to their deposits from today.
USDC recovered to $0.9917 from a record low of $0.87 hit on Saturday, well below the planned 1:1 peg to the US dollar. The fall was caused by concerns that Circle – the US firm that issues USDC – could be dependent on SVB.
Bitcoin, meanwhile, was down 0.3% at $22,125 on Monday morning, but up about 8% from Sunday’s lows.
Stablecoins like USDC are an important cog in the crypto trading world. They are designed to have stable value, usually backed by stocks of traditional assets such as US dollars, bonds or gold.
In earlier US trading, Riot Blockchain and Marathon Digital, cryptocurrency exchange Coinbase Global and software developer MicroStrategy also rebounded from last week’s lows and rose 6.5%-10%.
Analysts warn that market sentiment will remain uncertain despite US government 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.”
The relief for cryptocurrencies came as New York’s top financial regulator acquired Signature Bank, a key banking firm for cryptocurrency companies.
Signature Bank shares were suspended, and US officials said the bank’s depositors would be compensated with no loss to taxpayers.
The Twitter page of the leading American exchange Coinbase Global on Sunday posted that after the fall of Signature, it will “facilitate all customer cash transactions with other banking partners,” without elaboration.
All client cash at banks continues to be protected by FDIC pass-through insurance. Due to FDIC's hold on Signature’s transactions, we’re currently facilitating all client cash transactions with other banking partners.
— Coinbase (@coinbase) March 12, 2023
Coinbase said Signature’s corporate cash balance was approximately $240 million at the close of trading on Friday, but it expects to fully restore those funds.