Cryptocurrencies experienced a boost on Monday after the U.S. government took steps to protect depositors of the collapsed Silicon Valley Bank (SVB) and HSBC acquired the U.K. arm of the failed lender. According to recent data, Bitcoin surged by 5% to $22,374.68, while Ether rose by 2% to $1,585.58. Within the 24 hours leading up to 2 a.m. ET, the overall cryptocurrency market rose by more than $70 billion, jumping above $1 trillion on Monday.
The cryptocurrency market has been on a rollercoaster ride since the collapse of Silvergate Capital, a major lender to the crypto industry, last week. The lender announced it was winding down operations and liquidating its bank. The failure of SVB on Friday, the biggest banking failure since the 2008 financial crisis, further exacerbated the market turmoil.
The collapse of both Silvergate and SVB was due to the fact that these banks invested their funds in U.S. Treasuries which lost value when the U.S. Federal Reserve increased interest rates. These banks were then forced to sell these bonds at a loss to shore up their capital position. U.S. regulators then shut down Signature Bank, another major lender in the crypto industry, on Sunday to prevent any contagion to the broader banking sector.
However, the recent moves by regulators to create a backstop for SVB and protect depositors in these institutions have given investors renewed confidence. The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation announced on Sunday that depositors of SVB would have access to all of their money starting on Monday. The regulators clarified that taxpayers would not bear any losses associated with the resolution of SVB. Depositors at Signature Bank would also be “made whole”. HSBC’s announcement that it would acquire the U.K. arm of SVB for £1 ($1.21) added to the market’s euphoria. The U.K. Treasury confirmed on Monday that no taxpayer money was involved, and customer deposits were protected.
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