- Following the fall of Silicon Valley Bank, the United States government is considering safeguarding Silicon Valley Bank’s uninsured deposits, which amount to 85% of SVB depositors.
- The Federal Reserve reported funding of $25 billion to support banks that may be in trouble.
- After the government announcements, the cryptocurrency market had remarkable growth, for example, Bitcoin went from $19,000 to $26,000.
Every event that happens both in the financial world and on a day-to-day basis, as happened during the COVID pandemic, has a strong influence, both negatively and positively, on the price of digital assets.
When traditional stocks fall, BTC often does, and when they rise, so does digital gold. The recent events of Silicon Valley Bank are one more example…
US government plans a bailout of the SVB
Last week, the bank collapsed in a few days scaring everyone. Those in the crypto space may have seen the debacle in a different light as this happened at least twice in 2022 with the demise of Terra and FTX.
According to the media report CoinDesk, “approximately 85% of SVB depositors had money in accounts that were not FDIC-insured”, so those funds could disappear outright if the bank were not recovered by federal action or outright purchase. But the solution appeared.
The renowned newspaper Washington Post reported that the United States government headed by Joe Biden is seriously considering safeguarding Silicon Valley Bank’s uninsured deposits in case there are no buyers for the institution. The discussion is being conducted by officials from the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corp.
What do you get with this? Health. How? Panic and a possible collapse in the financial system are avoided. The United States decides to put a new patch on a catastrophe that seems ever closer and more real.
Federal Reserve announces bank bailout
At the same time that this is happening, the Federal Reserve reported a financing of $25,000 million dollars to support banks that could be in danger, as was the case with Silicon Valley Bank.
ANDThis plan, called the Bank Term Financing Program (BTFP), offers loans to be repaid in one year to “eligible banks, savings associations, credit unions, and other depository institutions.”
This capital, which will be collateralized by United States Treasury bonds, debt to agencies and mortgage-backed securities, will help prevent more actions for which Silicon Valley Bank had to face. SVB was forced to sell assets and shares to cope with all the pressures, which ended in a bank run that affected cryptocurrencies.
USD Coin (USDC), the second-largest stablecoin in the market, lost its peg to the US dollar by hours to bottom below 0.90.
Announcement favors the crypto ecosystem
The announcement by the Joe Biden administration not only brought relief to the banking sector, but filled the crypto space with green candles. Given the zero risk of the disappearance of USDC or DAI, another of the stablecoins that was compromised by the collapse of SVB (Circle, the issuer of USDC, had reported having $3.3 billion in Silicon Valley Bank), lThe cryptocurrencies regained confidence.
Bitcoin, at the time of writing this article, was in the range of $24,600 dollars after having stepped on a minimum of $19,600 before the aforementioned events. Even in the last hours it managed to reach over $26 thousand dollars. Ethereurm, for its part, grew to $1,630, +10% compared to the last 24 hours and +15% compared to its lowest point in the last week.
The intervention of the United States saved, once again, the announced crisis that is expected in the world economy. On this occasion, the cryptocurrencies enjoyed the relief to fill the market with green and enthusiasm.
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