Major cryptocurrencies rallied Sunday, as the Federal Reserve announced a new emergency loan program for banks after Silicon Valley Bank, once the 16th-largest bank in the U.S., and crypto-friendly Silvergate Bank both collapsed in the past few days.
U.S. equity markets also traded higher Sunday afternoon, with the Dow futures
up 0.8%, and the S&P 500 futures
up 1.2%. Futures for the Nasdaq 100
rose 1.2%, according to FactSet data.
The Fed’s new emergency loan program will help assure banks have the ability to meet needs of all their depositors, according to a statement. Under the program, banks and other lenders will be able to pledge Treasurys and mortgage-backed securities for cash, the Fed said.
Meanwhile, U.S. financial regulators on Sunday said Silicon Valley Bank depositors would have access to “all their money” starting Monday, according to a joint statement by the Department of the Treasury, Federal Reserve, and FDIC.
Over $3.3 billion, or 8% of the $40 billion reserves of USDC, the world’s second-largest stablecoin, are held at Silicon Valley Bank, the crypto’s creator Circle said Saturday. USDC, which is supposed to trade one-to-one against the U.S. dollar, rebounded to close to $1 on Sunday, after falling to as low as 86 cents Saturday, according to CoinDesk data.
What’s pulling back the bullish sentiment is that state authorities on Sunday shut down New York-based Signature Bank, which has a number of crypto clients, according to financial regulators.
All depositors of Signature bank will be made whole, according to regulators.
The closure of Signature Bank happened after crypto-friendly Silvergate Bank said Wednesday it would wind down its operations. It might further reduce crypto companies’ access to banks, who have traditionally been reluctant to work with crypto entities, partly due to a lack of regulation, industry participants said.
Signature Bank provides deposit services for its clients’ digital assets, but does not invest in, does not trade, does not hold on its own balance sheet or provide custody of digital assets, and does not lend against or make loans collateralized by such assets, the company said.
A representative at Signature Bank declined to comment.
The cryptocurrency market has seen a positive reaction to the Federal Reserve’s announcement of a new emergency loan program for banks. The two major currencies, Bitcoin and Ether, have both seen recent rallies, signaling investors’ confidence in the digital asset market.
The new loan program, called the Paycheck Protection Program, is designed to provide financial support to banks and other lenders that offer small business loans. The program is expected to help thousands of small businesses stay afloat amid the economic turmoil of the coronavirus pandemic.
The reaction from the crypto market has been positive, with Bitcoin and Ether both climbing in the wake of the announcement. Bitcoin, the world’s most valuable cryptocurrency, has risen 4% since the Fed announcement, and Ether – the second-largest cryptocurrency by market cap – has gained 7%.
The rally in Bitcoin and Ether is indicative of the growing confidence in the crypto market. The digital asset market has seen increasing interest from institutional and retail investors in recent months, and the recent announcement of the Paycheck Protection Program is likely to fuel further growth.
Furthermore, the new loan program is expected to improve the liquidity of crypto assets, as banks will have access to more funds to provide to businesses. This could help to alleviate liquidity constraints on the crypto market, which could lead to further upside in Bitcoin and Ether prices.
Overall, the recent rally in Bitcoin and Ether is a sign of investor confidence in the digital asset market, and the new Fed loan program is likely to further bolster the market’s prospects.