Bitcoin Price Jumps 15% Following US Regulatory Move
Bitcoin’s price surged by 15% on Monday, marking the biggest one-day increase since November 2021’s market turmoil. The rise came after US authorities took steps to allay concerns about the health of the nation’s financial system, leading to a rally in shares of cryptocurrency companies.
Bitcoin’s latest gains helped to extend its recovery from its worst week in around four months. The cryptocurrency market has been recently hit by several incidents ranging from an equity selloff to jitters in the banking sector and an escalating US regulatory crackdown on crypto. These various incidents saw a dip in the crypto market over the weekend, the de-pegging of the stablecoin USDC which is now trading at par again with the dollar after its de-pegging last week.
One of the major causes of the crypto market rebound came from the largest cryptocurrency exchange in the world ‘Binance,’ as they announced that they would convert the remaining stablecoin funds from a $1 billion industry stability fund to Bitcoin, Ether, and its BNB token, also added to the optimism.
This led to an increase in the price of the major crypto assets such as Bitcoin’s seeing an increase of up to 15% reaching $24,600 as of 1:03 p.m. in New York. This jump is the biggest since Nov. 10, 2021, when the collapse of FTX whipsawed markets. Over the weekend, US agencies pledged to fully protect all depositors’ money following the collapse of Silicon Valley Bank on Friday. On Monday morning, the bank’s UK branch was sold to HSBC Holdings Plc for £1.
However, Signature Bank, one of the most prominent US crypto-friendly banks left after Silvergate Capital Corp. shut down earlier this month, was closed by New York state financial regulators on Sunday with access to funds for depositors. The spate of bank closures had unnerved crypto markets, with several major crypto companies, including Circle Internet Financial, Coinbase Global Inc., and Paxos Inc. exposed.
Coinbase rose 9%, MicroStrategy Inc. climbed 14%, and Marathon Digital Holdings Inc. surged 18%. Gains among smaller crypto assets known as altcoins were mostly lower, with Cardano up about 7%, and Tron increasing around 10%.
The failure of SVB triggered a knock-on effect in the crypto’s crucial market of stablecoins after Circle, the operator of USDC, revealed it had $3.3 billion of reserves backing the token stored with the bank. Stablecoins are cryptocurrencies that aim to keep a one-to-one value with a less volatile asset like the US dollar and are an integral safe haven for crypto investors seeking to maintain value without exiting into traditional currencies.
The news of SVB’s shutdown caused Circle’s USDC to slip far below its dollar peg, the stablecoin equivalent of a money market fund breaking the buck and sending a shock to the broader sector. By Monday morning, USDC had recovered to trade at par again.
Darius Tabatabai, the co-founder of decentralized exchange Vertex Protocol, said, “For crypto markets, that means stablecoins are correcting, and investors are now looking to hedge potential stagflationary forces by buying a range of assets, including BTC, ETH, and altcoins alongside more traditional hedges such as gold and silver. Given the headwinds faced over the last two years, this could be a significant turning point for the space.”
In conclusion, Bitcoin’s surge of 15% and the rally in shares of cryptocurrency companies can be attributed to the US authorities’ efforts to stem the spread of concern about the health of the nation’s financial system. Additionally, Binance’s announcement that it would convert the remaining stablecoin funds from a $1 billion industry stability fund to Bitcoin, Ether, and its BNB token has helped boost confidence in the cryptocurrency market.