The banking system may currently be in a crisis following the shocking collapse of California’s Silicon Valley Bank (SVB) on March 10th, but some cryptocurrencies ended the week on a positive note.
Bitcoin and Ether both posted gains of around 4% following a serious plunge in the crypto market on Friday as SVB’s fall from grace spooked both conventional and crypto-centric markets.
A Sign of Stabilization?
As of Saturday, March 11th, Ether was up by more than $1,450. Bitcoin, on the other hand, went over $20,000 – a sign that the crypto market is correcting and stabilizing itself.
Both Bitcoin and Ether rallied despite falling below resistance levels during Friday trading. Other tokens, however, did not fare as well. Experts say that many traders shied away from taking risks on lesser-known tokens in light of the ongoing crisis.
Despite this ambivalence, some tokens did post modest gains over the weekend. Matic, Polygon’s token, rose by around 1.6%. BNB Coin and XRP, on the other hand, were both up by 2% during evening trading in Asia on Saturday.
What About USD Coin?
The exposure of USD Coin-issuing firm Circle to SVB, in particular, raised concerns in the field.
For his part, Adam Cochran, a partner at crypto fund CEHV, opines that such concerns are unfounded, even exaggerated, as around 62% of balances were immediately paid off under the FDIC’s advanced dividend process.
North Rock Digital co-founder Hal Press added that around 77% of Circle’s reserves are held in US Treasury bills which means that the theoretical floor price for USD Coin stands at around 77 cents.
Market Panic
Friday saw spooked traders selling their holdings as the Federal Deposit and Insurance Commission (FDIC) stepped into the breach and took over SVB following a massive bank run. USD Coin, in particular, saw its value drop to a shocking low of 87 cents. However, analysts were quick to allay fears regarding USD Coin by reminding the public that the token is backed by the US Treasury.
Around 80% of USD Coin’s assets are made up of 6mn US Treasury Bills, 85% of which were rolled over in the past quarter. Likewise, interest rate risk remains negative at this point.
Meanwhile, the total market capitalization of the cryptocurrency sector plunged under $920 billion, its lowest since November 2022. Likewise, more than $200 million worth of crypto-tracked futures were liquidated throughout Saturday.
Bitcoin futures amounting to almost $60 million made up the bulk of liquidated crypto assets, while around $40 million worth of ether futures were likewise liquidated. Both are seen to have contributed to their slide on Friday.
