Cryptocurrency traders who thrive on market volatility have been on a wild roller coaster ride over the past week. More risk-averse investors might be feeling squeamish, but it’s all a part of the volatile market that’s at least ending well for the bulls so far.
Bitcoin, the leading cryptocurrency soared past the $24,000 mark after falling below $20,000 recently. Bitcoin and the rest of the cryptocurrency markets have been following traditional assets for most of the year (and last year) while inflation fears and rising interest rates have once again been a prime factors in moving all markets.
More recently, the collapse of SVB Financial Group has been dumping a large bucket of volatility on the financial markets, which is spilling over into the crypto markets. The fallout from the SVB debacle also caused shares of regional banks to slide, including the San Francisco-based First Republic, which saw a 60% fall in its share price on Monday, March 13.
That affected other bank stocks, causing multiple halts in the trading of shares, according to a Reuters report. These latest developments follow crypto lender Silvergate Capital announcing that it would wind down operations, while Signature, another crypto-friendly bank, was seized by banking regulators.
U.S. Government Saves the Day
Because of the threat of a potential banking crisis, U.S. President Joe Biden addressed the situation and vowed to do what was necessary to prevent a crisis from occurring. This, in effect, injected much-needed euphoria into investors, which spilled over into the cryptocurrency markets.
The aforementioned Reuters report noted that national regulators implemented emergency measures, while First Republic secured additional financing, thanks to help from JPMorgan and the U.S. Federal Reserve. The latest slide in bank stocks follows the aggressive monetary policy tightening of the Fed as it looks to get inflation under control.
In essence, rising rates can affect the bottom line of regional banks, especially if a number of their products rely on loans, which consumers are not demanding if rates are just too high. According to Art Hogan, chief market strategist at B. Riley Wealth, the market is “finding out in real time what the risk of rising interest rates at such a fast pace can do to the balance sheets of some of the regional banks.”
“Given the Fed announcement over the weekend of a backstop for banks and specifically Silicon Valley Bank, markets have turned euphoric knowing that depositors’ money is safe and a major potential bank run has been averted,” said Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, in a CNBC report.
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