Bitcoin and other cryptocurrencies rallied on Friday, just as former tech bank parent Silicon Valley Bank filed for Chapter 11 bankruptcy and stocks tumbled amid fears of a banking crisis.
The largest digital asset by market capitalization surpassed $27,000 on Friday morning Eastern Time. As of this writing, it had fallen to $26,555, a 6.2% 24-hour jump. It increased by more than 30% last week.
In the meantime, Ethereumthe second-largest cryptocurrency by market cap, was trading at $1,727, up 4% in the past day and more than 20% in seven days.
But the stock market is not moving in tandem – a departure from the correlation that investors and traders have grown accustomed to in recent years. US stocks and bank stocks fell today as spooked investors pulled out of their positions amid fears of a possible banking crisis.
Regulators close Silicon Valley Bank (SVB) last week, sending shockwaves through the financial system.
A number of crypto companies exhibition allowed to the company, which had positioned itself as the preferred bank of the tech startup world. Former parent company of SVB today deposit bankruptcy in order to seek buyers for its assets.
It came after March 8 from crypto-friendly bank Silvergate close. Then, following the failure of SVB, New York regulators farm Signature, another bank that catered to the crypto world, causing problems for digital asset companies that relied on these firms to gain access to the traditional financial system.
Since then, the banking sector has been on fragile ground: the action of Credit Suisse plunged earlier this week after the Saudi National Bank – its biggest lender – said it would not offer more financial aid.
And today, shares of US regional bank First Republic took a hit as it continues to face a crisis of confidence from investors and customers.
Why is Bitcoin and the rest of the digital asset market doing so well then?
It might have something to do with the Federal Deposit Insurance Corporation deny the reports that potential buyers of Signature Bank should stop doing business with crypto, instilling investor confidence in digital assets.
And investors may have a renewed appetite for risk: the Federal Reserve’s rate hike cycle may be coming to an end due to the current wobbly situation in which the banking world finds itself.
Shipyard Software CEO Mark Laurie said Decrypt that the Federal Reserve’s bank term funding program – which promises money to struggling banks – “effectively kick-starts quantitative easing, which inflated the crypto-asset and growth-asset bubble first place”.