The Key Points
The closure of Signature has raised concerns among crypto entrepreneurs and investors that regulators are trying to crush the industry by requiring banks to close their doors.
On Monday, cryptocurrencies rose amid a wider rally in risk assets. However, regulators Sunday announced that Signature Bank, the last major cryptocurrency bank in the U.S., would be closing.
According to Coin Metrics Bitcoin rose by more than 14% to $24,195.00 and is currently 18% higher than its Friday levels. Chart analysts have been searching for a significant break above $25,000 since the January rally in risk assets started to stall out.
Ether rose by 9% to $1680.19.
After U.S. regulators announced plans on Sunday night to support all depositors at failed Silicon Valley Bank and provide additional funding for other banks, the risk assets soared.
Investors also bet Monday that the Fed would be less aggressive in raising interest rate now that authorities have intervened to stop the fallout from Signature and SVB.
"A slower pace of hiking and a lower rate of terminal interest, along with the possible injection of liquidity to support banks struggling to meet withdrawals (through Bank Term Funding Program), imply greater market liquidity even if this may be partially offset" said Noelle Acheson economist, writer of "Crypto is Macro Now".
She stated that Bitcoin is one of the most sensitive assets for market liquidity because its 'risk profile is not encumbered earnings or ratings concerns."
The last major cryptocurrency bank
In Sunday's joint statement, the Treasury, Federal Reserve and FDIC announced that Signature Bank had been closed on Sunday to stop the spread of the banking crisis.
Sylvia Jablonski (CEO and chief investment officer at Defiance ETFs), stated that Signature and Silicon Valley Bank had "little diversification." "High risk often comes with high reward. However, if the system's balance sheet crashes, while the Fed removes liquidity from the system, and raises rates, crypto startups and venture capitalists could have a long road back to recovery.
She said, "It is a complicated matter in the short term." "The Fed's announcement of a backstop has helped to boost equities overnight. However, panic will set in and we will need to see how the market reacts to that.
The closure of the exchange led to crypto prices rising Monday despite the fact that it raised concerns among entrepreneurs and investors that regulators were trying to crush the industry by requiring banks to close their doors.
Signature Bank, another crypto-friendly institution, was the second largest after Silvergate. It announced its impending liquidation last Wednesday. Wall Street analysts maintained buy ratings for Signature Bank on Friday, despite the negative news about Silvergate and SVB.
Crypto has few on-ramps that allow fiat money flow into crypto assets with the end of the Silvergate/Signature duo. This problem was solved by the creation of easy banking services for crypto companies and payment platforms, namely Signature's Signet and Silvergate Exchange Network.