Cryptocurrencies are on a tear at the start of the week amid a broader rally in risk assets, after regulators on Sunday announced the closure of Signature Bank, making it the third U.S. bank to close down in just a week. Bitcoin rose more than 14% to $24,089.12, according to Coin Metrics, and is now about 18% above its Friday levels. Ether rose 8.5% to $1,673.29.
The jump in riskier assets came after U.S. regulators announced plans on Sunday night to backstop all the depositors in failed Silicon Valley Bank and make additional funding available for other banks.
Investors were also betting Monday that the Fed will be less aggressive in raising interest rates now that authorities have stepped in to limit the fallout from SVB and Signature.
Signature Bank is the latest bank to be taken over by the FDIC. The Treasury, Federal Reserve, and FDIC disclosed in Sunday’s joint statement that Signature Bank was closed the same day, in a bid to prevent the spreading banking crisis.
What Happened to Signature Bank: Signature Bank is a full-service commercial bank that was founded in 2001 and is headquartered in New York City. It offers a range of banking products and services to businesses, individuals, and institutions.
The bank is known for its focus on serving the needs of privately owned businesses, their owners, and senior management teams. It has a team of relationship managers who work closely with clients to provide tailored solutions to their banking needs.
One of the bank’s unique offerings is its digital platform, which allows clients to access their accounts and manage their banking needs online. The platform includes features like mobile check deposit, online bill pay, and account transfers.
Signature Bank is another famously crypto-friendly institution and the next biggest one next to Silvergate, which announced its impending liquidation last week. Wall Street analysts Friday had maintained buy ratings on Signature Bank, even as the bad news around Silvergate and SVB unfolded.
The bank faced a crisis of confidence after midsize lender Silicon Valley Bank was seized by regulators on 10 March. The signature was also reeling from a bet on crypto banking that foundered after the sector imploded and banking regulators cracked down on lenders’ exposure to digital assets.
The bank raced to find a buyer or another solution to shore up its finances before the morning of 13 March but failed to get a sale done in time, according to people familiar with the matter.
State regulators closed Signature Bank on Sunday, and it is described as the third largest failure in U.S. banking history, two days after authorities shuttered Silicon Valley Bank in a collapse that stranded billions in deposits.
The Federal Deposit Insurance Corporation (FDIC) took control of Signature, which had $110.36 billion in assets and $88.59 in deposits at the end of last year, according to New York state’s Department of Financial Services.
All of the depositors of Signature Bank and Silicon Valley Bank will be made whole, and “no losses will be borne by the taxpayer,” the U.S. Treasury Department and other bank regulators said in a joint statement.
As of September, almost a quarter of its deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.
What You Should Know: U.S. President Joe Biden vowed to do whatever was needed to address a threatened banking crisis after the collapses of Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O) forced regulators to step in with emergency measures.
Biden’s attempt to reassure markets and depositors came after weekend moves by the United States to guarantee deposits at collapsed tech-focused lender SVB failed to persuade investors that other banks around the world were healthy.
However, the words of the President have fallen on deaf hears as Monday’s U.S. market open saw First Republic Bank tumble 65.1% despite news it had secured fresh financing, while Western Alliance Bancorp, PacWest Bancorp, and Charles Schwab fell 75.9%, 41.0% and 19%, respectively.
Big U.S. banks including JP Morgan Chase (JPM.N), Morgan Stanley (MS.N) and Bank of America (BAC.N) also fell.
The SVB shockwaves were felt in Europe too, where the STOXX banking index was down 6.3% in its largest one-day fall in more than a year. Germany’s Commerzbank fell as much as 12.7%, while Credit Suisse hit a new record low after falling 15%. Swiss financial regulator FINMA said it was closely monitoring the banks and insurers it oversees and looking for signs of contagion from the collapse of SVB and Signature.
Meanwhile, a furious race to re-price interest rate expectations also sent waves through markets as investors bet the Fed will be reluctant to hike next week. Traders currently see a 50% chance of no rate hike at the Fed’s meeting next week, with rate cuts priced in for the second half of the year.
Earlier last week a 25 basis point hike was fully priced in, with a 70% chance seen of 50 basis points.
Two-year U.S. Treasury yields were last down 55 bps at around 4.09% set for their biggest one-day fall since 1987 according to Refinitiv data. SVB’s collapse comes alongside the closure of crypto-focused bank Silvergate, which last week disclosed plans to wind down operations and voluntarily liquidate, in the aftermath of FTX’s implosion last year.
U.S. banks lost more than $100 billion in stock market value late last week following SVB’s failure, while European banks have now lost a similar amount.
The cryptocurrency market has reclaimed its trillion-dollar status after losing it over the weekend. USDC, which lost its peg to the US Dollar has now pegged. It looks like there is a flight to invest in Bitcoin as the flagship token leads the current rally in the market.
This is because the whole point of Bitcoin is to shore up against situations like this where the possibility of depositors losing their funds is an option. Now more than ever, the need for a use-case for crypto comes into play and investors are taking a flight towards the asset.
