The U.S. government has decided to save clients’ deposits in the battered Silicon Valley Bank (SVB) and Signature Bank (SB), but others were left drowning. This collapse may spur a chain reaction in the national banking system, as it was used by short sellers to raid some banking stocks. Western Alliance and First Republic share prices were dumped by 75% and 65% respectively.
The crypto market was certainly affected too. Circle, which issues USDC coin, had deposited $3.3 billion worth of its $40 billion funds to back its obligations in SVB. The collapse of the bank forced Circle to stop the exchange of UDSC to Greenback for a couple of days. The exchange operations were resumed on Monday after Circle announced that the $3.3 billion it had in SVB will be fully available starting from this Monday and confirmed that USDC remains redeemable 1-to-1 with the U.S. Dollar. Even this small break in exchange operations was used to drop the USDC exchange rate to $0.86. Large claims to withdraw money from the stablecoin appeared on Monday after exchange operations were resumed, despite tamed panic.
The actions of the Federal Reserve (Fed) have seen to not be enough to comfort the market as investors believe SVB troubles may spread across other banking institutions. Risky assets are suffering amid such expectations. Bitcoin prices have formed a bearish head-and-shoulders pattern on the D1 daily timeframe. The price is now squeezed in the right shoulder, targeting $16,100 per coin. However, it has several ways in which it can move. The simplest way is to plunge straightforward toward the target, and another is a bearish raid for additional liquidity towards $25,200 per coin, which may be followed by a rapid decline.
Thus, the situation in the crypto market remains very tense with a global bearish outlook and no current visible reasons for this to change. The situation could change, however, if the Fed decides to return to quantitative easing if the situation in the banking sector spins out of control. But this is highly unlikely. Nonetheless, there are still some optimists in the market. Binance chief executive, Changpeng Zhao, has decided to invest $1 billion in Binance USD (BUSD) coins amid it’s decline after U.S. authorities stopped coin issuance. Part of this investment will be located in ETH and BNB. This investment amount will hardly affect prices, but is quite a positive sign of optimism for a long-term perspective.