Pre-bitcoin banks go bankrupt – Newspaper Kommersant No. 42 (7487) of 03/14/2023

Turbulence in the US banking market, caused by the bankruptcy of a number of credit institutions, has returned investor interest in cryptocurrencies. After a fleeting fall in early March, bitcoin quotes again exceeded $24,000. Ethereum quotes showed similar dynamics. The USDC stablecoin also recovered its positions, part of the security of which was in the bankrupt Silicon Valley Bank. However, according to experts, pressure from regulators, new bankruptcies and the recognition of cryptocurrencies as securities can slow down the further growth of the market.

According to Coinmarketcap, on Monday, March 13, the bitcoin exchange rate exceeded $24,000, adding 17% in a day and updating the maximum since the end of February. Growth began on Saturday and intensified against the backdrop of the banking crisis in the US. The Ethereum exchange rate repeated the dynamics of the first cryptocurrency with a smaller amplitude: an increase of 13.5%, to $1.67 thousand. Quotes of other digital currencies – Binance Coin, Ripple, Cardano, Dogecoin, Solana – added 10-15%.

Experts note that last week the crypto market lost its correlation with stock indices. At the same time, at the end of the week, there were reports of the bankruptcy of the Silvergate bank – and this provoked panic sales both in the stock market and in the crypto market, indicates Andrey Podolyan, CEO of Cryptorg.

The cryptocurrency market went up on the back of the news about the Fed launching a $25 billion bank bailout program, says Nikita Vassev, co-founder of 0xprocessing.

The regulator made this decision against the backdrop of the bankruptcy of Silicon Valley Bank and the growing tension in the banking sector. “Participants of the crypto community perceived the news as the Fed’s move towards a quantitative easing policy, which involves the launch of a printing press with the infusion of new portions of dollars into the market. The movement according to the scheme can support the growth of the digital asset market, which will be fueled by the money valve opened by the regulator,” Mr. Vassev points out. In addition, the Binance crypto exchange announced that it will transfer almost $1 billion from stablecoins to other cryptocurrencies.

Growth was facilitated by investors’ fear of continuing high inflation and falling financial sector shares, Roman Nekrasov, co-founder of the ENCRY Foundation, believes. “Investors in a panic are looking for where to transfer their assets so that they can at least save their value, and cryptocurrencies are seen as one of the tools for such preservation, and in a positive scenario, also for increasing assets,” the expert emphasized. It is worth noting that at the same time on March 13, the price of gold on the world market exceeded $1.9 thousand per troy ounce.

Separately, experts note the turbulence of USDC quotes (USD Coin) against the background of the collapse Silicon Valley Bank, where the stablecoin issuer Circle held part of the collateral. As a result, stablecoin quotes fell below $0.9 two days ago. Against the backdrop of USD Coin unbinding, some algorithmic stablecoins, including DAI, have depegged (from the English depeg; a situation where one asset loses a fixed parity (1:1) with another), Mr. Vassev noted. The reason, according to him, is that the tokens were partially backed by USD Coin. However, the situation stabilized amid statements from Circle about its readiness to cover any shortage of stablecoin collateral, and USDC quotes returned to $1.

However, after such a strong growth, a correction is likely, experts warn. In addition, further movements in quotes largely depend on the actions of the Fed, which in a week, on March 22, will make a decision on the key rate. “We cannot rule out a forced softening of rhetoric in order to reduce pressure on the already staggering banking sector. This will help support the stock market, which, in turn, is followed by the crypto. The softening of rhetoric against the backdrop of the launch of the printing press can lead the digital asset market to local highs,” Mr. Vassev expects.

If bitcoin manages to gain a foothold at $25,000, then the next resistance level will be $27,500, Mr. Nekrasov estimates. At the same time, according to experts, turbulence in the markets does not allow making accurate forecasts. In addition, pressure from regulators on the market, including the recognition of cryptocurrencies as securities, new bankruptcies and other “aggravating circumstances” can slow down growth for a long time, Mr. Vassev believes.

Ksenia Kulikova