Bitcoin rebounds as U.S. backstops deposits at crypto-linked banks

Bitcoin and Ether led a strong price rebound in the top 10 non-stablecoin cryptocurrencies in morning trading in Asia as U.S. banking regulators took control of Silicon Valley Bank and Signature Bank, both with ties to the crypto industry, and guaranteed deposits at the institutions as well as additional backstops for the banking industry. The moves followed the failure of Silvergate Capital last week that raised the threat of a systemic run on banks. Solana led the gains.

See related article: Crypto bank Silvergate to close, return all deposits; becomes latest victim of 2022 crypto turmoil

Fast facts

• Bitcoin jumped 9.60% in the past 24 hours to US$22,601 at 09:00 a.m. in Hong Kong, according to CoinMarketCap data. Ether gained 9.77% to US$1,621.
• Solana surged 12.85% to US$20.38 to lead the gainers, but still has more ground to make up as it’s down 2.93% over the past seven days. 
• USD Coin (USDC), the second largest stablecoin by market capitalization, traded back in line with its U.S. dollar peg in the Asia Monday morning after briefly losing the peg following the failure of Silicon Valley Bank where it holds about US$3 billion in deposits, according to Circle, the issuer of USDC. 
• USDC fell to US$0.8774 on Saturday and its market cap slumped 15% to US$36 billion from US$43 billion. Circle said the same day the company had the funds to back USDC and it would remain redeemable 1 for 1 with the U.S. dollar. USDC recently traded at US$0.9941.
• Circle CEO Jeremy Allaire said on Monday that all Circle deposits will be available when banks open on Monday.
• The total crypto market capitalization rose 6.47% in the past 24 hours to US$1.01 trillion. Total trading volume over the last 24 hours was down 34.52% to US$60.19 billion.
• U.S. equities slid on Friday. The Dow Jones Industrial Average dropped 1.07%, the S&P 500 fell 1.45% and the Nasdaq Composite Index was down 1.76%.
• The slump in equities followed the collapse of Silicon Valley Bank, which was taken over by the FDIC on Friday, in the biggest U.S. bank failure since 2008. However, U.S. stock futures were trading higher on Monday morning in Asia, reflecting the moves to backstop the U.S. banking industry. 
• Amid the banking scares, investors had to contend with the job report from the Labor Department on Friday that showed February nonfarm payrolls came in at  311,000, beating the projected 225,000. This furthers the narrative that the Federal Reserve may raise interest rates more than previously expected to curb inflation.
• However, with banking failures now the center of attention and concern, analysts at the CME Group predict a 17.4% chance of a 50 basis point hike this month, a sharp drop from 60.9% last Friday. This reflects a view the Fed is unlikely to raise rates by that much in the middle of a series of bank failures.
• CME expect a 82.6% chance the Fed will raise rates by the forecasted 25 basis points this month, but other commentators say the Fed may postpone any hike until next month because of the banking industry jitters.
• The Fed meets on March 22 to make its next decision on interest rates, which are currently between 4.5% to 4.75%, the highest since October 2007.
• The U.S. annual inflation rate is 6.4% for the year ended January 2023, according to Labor Department data released on Feb. 14, which is well above the Fed’s long-term goal to keep inflation in a 2% band. The next inflation update is scheduled for March 14 at 8:30 a.m. Eastern Standard Time.

See related article: Weekly Market Wrap: Bitcoin falls below US$20,000 as Silvergate collapse, rate hike concerns rise