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.