ABOUTmajor cryptocurrencies rallied on Monday amid plans by the US government to protect depositors of failed US banks Silicon Valley Bank and Signature Bank.
The cryptocurrency market capitalization surpassed $1 trillion on Monday, increasing by about 14% in one day. Over the weekend, the cryptocurrency market experienced a sharp decline.
Last Sunday, the US Federal Reserve issued two statements with one clear message: Depositors at Silicon Valley Bank, both insured and uninsured, will receive assistance that will “fully protect” their deposits.
The consecutive failure of two large US banks at once created the risk of financial contagion – the so-called chain reaction of financial shocks, which in this case could lead to the failure of other credit institutions. Now the risk of financial contagion is lower than last Friday, but still not zero.
Over the past 24 hours, bitcoin has gained 14.8% to surpass $24,200, while ethereum is up 9.25% to $1,680, according to CoinDesk data. These two cryptocurrencies are the largest by market capitalization.
Many other cryptocurrencies also rallied, including stablecoin USDC, which fell to $0.88 after the bankruptcy of Silicon Valley Bank, which held $3.3 billion in cryptocurrency collateral. Now, amid the statements from the US authorities, the USDC has almost returned to its price of $1.
The crypto market, along with other major industries, had a volatile week after Silvergate Capital, one of the largest banks servicing crypto companies, revealed that it was winding down operations and liquidating its banking division.
Shortly thereafter, on Friday, Silicon Valley Bank collapsed, and on Sunday, regulators shut down Signature Bank, a major crypto-lender. However, this market turmoil seems to have supported the cryptocurrency market as traders reacted positively to the news from the US authorities.