TL;DR:
- The crypto market has rebounded following the FDIC banking intervention in a banking crisis, with Bitcoin and Ethereum prices rising. The FDIC and US government issued a joint statement stating that depositors of Silicon Valley Bank and Signature Bank would be able to access their funds, restoring confidence in the crypto market.
- The recent banking chaos and contagion began when crypto-friendly Silvergate Bank showed signs of trouble, leading to the shutdown of the Silvergate Exchange Network. Silicon Valley Bank has significant exposure in the crypto market, and its failure could have a significant impact on the crypto market, including crypto mining.
- The recent troubles for Silicon Valley Bank and crypto-focused Silvergate have left traders on guard this week for signs of contagion in the financial sector, causing hesitation in traditional financial markets.
Bouncing Back
The crypto market has recently bounced back following the FDIC banking intervention in a banking crisis. The Federal Reserve, US Treasury, and FDIC have released a joint statement declaring that all depositors of the now-shuttered Silicon Valley Bank and Signature Bank will be able to get their funds out on Monday, which has resulted in the crypto market rising. In the past 24 hours, Bitcoin (BTC) was up to $22,300 and Ethereum (ETH) was at $1,596, with top-30 coins Cardano (ADA), Polygon (MATIC), Solana (SOL), Litecoin (LTC), Avalanche (AVAX), and Filecoin (FIL) also up by more than 10%. Conversely, the news prompted hesitation in traditional financial markets, with the US dollar dipping in early Monday trading.
Silicon Valley Bank has had significant exposure in the crypto market, with numerous crypto companies having already signaled their exposure to the bank. The recent banking chaos and contagion began when crypto-friendly Silvergate Bank showed signs of trouble, leading to the shutdown of the Silvergate Exchange Network. This article will discuss how this banking intervention has influenced the crypto market and how it is related to crypto mining, which verifies and adds new cryptocurrency to the blockchain.
Circle will continue to operate
On Friday, Circle, the issuer of the USDC stablecoin, said in a tweet that the company and USDC “continue to operate normally” as it waits for clarity on what will happen to Silicon Valley Bank depositors [2]. Meanwhile, US crypto exchange Coinbase has suspended the exchange of USDC for US dollars over the weekend, citing heightened activity, but plans to resume swaps on Monday [1]. Joseph Edwards, an investment advisor at Enigma Securities, stated that the situation is “extremely serious” for USDC, as such a depeg on a stablecoin tends to fundamentally undermine confidence in it [2].
USDC is a stablecoin designed to maintain a constant exchange rate with fiat currencies, such as the US dollar. The coin has a market cap of $37 billion and is the second-largest stablecoin after Tether, which has a market cap of $72 billion [2]. USDC’s price usually holds close to $1, but on Saturday, it fell below $1 to as low as $0.88, which is unprecedented [3]. The recent troubles for Silicon Valley Bank and crypto-focused Silvergate have left traders on guard this week for signs of contagion in the financial sector [2]. Circle has moved a small percentage of USDC reserve deposits held at Silvergate to its other banking partners and stated that the situation is under control [3].
The recent news of the government’s intervention in a banking crisis has had a positive effect on the crypto market. As mentioned, the market cap of all cryptocurrencies is back above the $1 trillion mark, and the prices of Bitcoin and Ethereum have risen. This positive turn is due to the FDIC and the US government’s joint statement regarding the depositors of Silicon Valley Bank and Signature Bank being able to access their funds.
This news has restored confidence in the crypto market, and we have seen top-30 coins such as Cardano, Polygon, Solana, Litecoin, Avalanche, and Filecoin all up by more than 10%. This increase in prices has also been seen in stablecoins such as US Dollar Coin (USDC), which regained its dollar peg, returning to a price of 99.3 cents on multiple price indices.
Hesitation in the markets
However, this banking intervention has also led to hesitation in traditional financial markets, with the US dollar dipping in early Monday trading. This hesitation in traditional financial markets shows the increasing influence that the crypto market has on the traditional financial system. Furthermore, Silicon Valley Bank has had significant exposure in the crypto market, with numerous crypto companies having already signaled their exposure to the bank. The recent banking chaos and contagion began when crypto-friendly Silvergate Bank showed signs of trouble, leading to the shutdown of the Silvergate Exchange Network.
The shutdown of the Silvergate Exchange Network, Silicon Valley Bank, and the recent FDIC banking intervention all have implications for crypto mining, which verifies and adds new cryptocurrency to the blockchain. Crypto mining is what verifies and adds new cryptocurrency to the blockchain. To verify the transaction, a hugely complex mathematical equation needs to be solved first, which is where crypto miners come in. Mining is validating new blocks and gaining access to the coins within. Interestingly enough, since the blockchain has to be finite, it also means that most cryptocurrencies have a hard limit to how many can exist. Bitcoin, for example, has a cap of 21 million.
The recent banking chaos and contagion have implications for crypto mining. As banks such as Silicon Valley Bank continue to have significant exposure in the crypto market, their failure could have a significant impact on the crypto market. The failure of a bank that has significant exposure to the crypto market could result in a significant loss of coins, which would reduce the number of coins that can be mined in the future. Furthermore, the recent banking intervention by the FDIC and the US government shows the increasing influence that the traditional financial system has on the crypto market. The influence that the traditional financial system
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