This week, Bitcoinโs (BTC) upward surge was the most significant event. The coin rose above $27,000 amid a banking crisis in the United States. The situation reiterated the need for users to hedge against economic instabilities using digital assets. In the mid of this crisis, the Silicon Valley Bank (SVB) saga remained in focus as fresh details emerged. Meanwhile, the United States regulatory climate came under further criticism as industry leaders highlighted the potential dangers of unfavorable legislation.
Bitcoin breaks above $27,000
Two weeks ago, bitcoin was under immense liquidation pressure, falling below the $20,000 psychological support. However, the asset recovered gradually before exploding to spot rates. Notably, the coin found tailwinds in the banking turmoil in the United States, reminding citizens of the benefits of digital assets.
The emerging uncertainty initially forced bitcoin lower two weeks ago on news that Circle, the issuer of USDC stablecoin, was exposed to the Silicon Valley Bankโs illiquidity. However, demand for legacy crypto started rising last week when it became clear that crypto assets could be leveraged to hedge a banking crisis.
At the back of this confidence, BTCย recapturedย the $24,000 mark mid this week, rising 9% in the 24 hours leading to Mar. 14. Industry leaders also ascribed bitcoinโs momentum to the Federal Reserveโs (Fed) likely move to slow down on interest rate hikes in response to falling inflation. Consequently, BTC rose 20% week-to-date as of Mar. 14.ย
Despite this favorable run, vocal bitcoin critic Peter Schiffย assertedย that the current bitcoin momentum is not sustainable, insisting that the Fed is a trigger. Schiffโs remarks came when BTC was trading at $24,200.
Even so, bitcoinย pumpedย harder, rising 9% to a 9-month high of $26,373 on the same day. Bitcoinโs break above the $26,000 threshold came on the back of the latest U.S. Consumer Price Index (CPI) report, which revealed that the inflation rate declined from 6.4% in January to 6.0% in February. It marked the eighth consecutive decline since year-on-year inflation peaked at 9.1% in June 2022.
As bitcoin rallied, billionaire Mike Novogratzย notedย this was the opportune time for investors to transition into gold and bitcoin since the financial situation in the United States could worsen. He believes investing in digital assets or precious metals could help investors weather the looming storm.
With a recovery campaign in sight and the escalating banking crisis, investors started trooping into bitcoin, as evidenced by a surge in holders of the assets.ย
Asย reported, bitcoin addresses holding at least 0.01 BTC had hit an all-time high of 11.66m. The total number of bitcoin addresses surged to 45.14m.
Renewed momentum leads to recapture of $27,000
Despite the bullish development, bitcoin slipped from the previously reclaimed $26,000 price to a low of $23,964 on Mar. 15. This came on the back of an increase in the dollar index as the banking contagion spilled into Europe, impacting the Euro. The following day, bitcoin recovered,ย surgingย above $25,000 despite the dollarโs newfound strength. By Mar. 17, the coin wasย tradingย above key resistance levels above $26,000.
At these levels, on-chain dataย revealedย that retailers were accumulating bitcoin at the highest rate since the FTX implosion of November 2022.
As bitcoin demand spiked, the coin eventually broke above $27,000 for the first time since June 2022. The uptrend continued over the weekend as the coin rose to $27,756 before slightly retracing. Over the last week, BTC gained 31%.
Silicon Valley Bank drama unfolds
There was more news on Silicon Valley Bank concerning its financial standing and the Federal Deposit Insurance Corporationโs (FDIC) position on uninsured depositors.
Speaking on CBSโย Face the Nationย last Sunday, Janet Yellen, the U.S. Secretary of the Treasury,ย disclosedย that there are no plans to bail out Silicon Valley Bank. Instead, financial authorities were taking appropriate measures to address the situation to benefit investors and depositors. These remarks emerged amid concerns that the FDIC does not insure most SVB depositors.
U.S. President Joe Biden alsoย commentedย on the unfolding situation, assuring the public that taxpayers will not have to pay for the losses incurred in the wake of the implosions of Silicon Valley Bank and Signature Bank. Bidenโs comments followed Yellenโs words of assurance to affected stakeholders.
Bloomberg revealed that the FDIC had begun auctioning SVBโs assets, putting the deadline for the final bid on Mar. 12. Even so, no significant bids were received. Furtherย reportsย suggested that the FDIC might be looking into setting up a second auction for SVBโs assets.ย
Meanwhile, SVB Financial Group, the parent company of Silicon Valley Bank, wasย reportedย on Mar. 16, to be on the verge of filing for Chapter 11 bankruptcy protection as it looked to navigate ways through which it could sell off its leftover assets. Barely 24 hours after the report, SVB Financial Groupย announcedย that it had filed for chapter 11 protection and was looking for buyers of the remaining assets.
Following the collapse of Silicon Valley Bank on Mar. 10, apprehensions of a contagion in the crypto scene emerged, given the bankโs links with several crypto-focused companies. A comprehensiveย listย of the affected firms was unveiled last week. Impacted entities included Circle, Ripple, BlockFi, Yuga Labs, Avalanche, and Proof.ย
The U.S. regulatory scene: progress or regression?
Amidst the cryptocurrency marketโs bullish momentum and the U.S. banking crisis, American regulators came under further criticism from the cryptocurrency community as industry leaders continued to point out the potential impact of an unfavorable regulatory climate in the wake of new disclosures.
Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), once againย reiteratedย his stance that all crypto assets utilizing the proof-of-stake consensus mechanism are, in fact, securities. Genslerโs remarks contradicted those held by Rostin Behnam, the Commodity Futures Trading Commission (CFTC) chairman.
Furthermore, a Reuters report from Mar. 15ย allegedย that the FDIC demanded that the potential Signature Bank purchaser drop the embattled financial institutionโs crypto-focused clients. Following the report, Ark Invest CEO Cathie Woodย wroteย a letter to Martin Gruenberg, the FDIC chairman, seeking to know if the FDIC wants to purge the traditional banking sector of crypto-focused entities.
Wood emphasized that the cryptocurrency scene is not responsible for the U.S. banking sectorโs current crisis. She charged American financial authorities with not using the crypto industry as a scapegoat for their mistakes resulting in the current situation. U.S. Rep. Tom Emmer alsoย allegedย that the Biden Administration is seeking to weaponize the banking crisis against the crypto industry.
Notwithstanding, shortly after the Reuters report, the FDICย responded, debunking the circulating claims that the corporation was insisting that potential purchasers of Signature Bank drop crypto-focused entities.
