Bitcoin BTC Price Surge to $24.5,000 Stems from Banking Interventions by Regulators, Binance Stablecoin Conversion, and Investor Hopes for Fed Dovishness

Bitcoin jumped above $24,000 for the first time in more than two weeks as investors expired after US regulators stepped in to guarantee deposits at Silicon Valley Bank (SIVB) and Signature Bank ( SBNY), and took hope that the near collapse of the banking sector would prompt the Federal Reserve to catch up on its monetary aggressiveness.

The largest cryptocurrency by market capitalization traded as high as $24,574 midday Monday, according to data from CoinDesk – before recently pulling back slightly above the $24,200 mark, still up more than 10% in the last 24 hours. BTC fell below $20,000 last Friday (UTC) as SIVB slumped.

But a number of analysts said markets were buoyed by regulators’ decisions on Sunday night to make depositors at crypto-friendly Signature Bank and Silicon Valley Bank. Earlier in the day, New York state’s top regulatory agency shut down Signature, saying it had “taken ownership of the bank to protect depositors.”

“The Fed’s bailout for depositors eased some of the fears around contagion risk, leading to a short squeeze,” Martin Leinweber, digital asset product specialist at MarketVector Indexes, told CoinDesk.

Monday’s surge caught traders betting on lower prices by surprise, forcing them to liquidate some $81 million in short positions in BTC during the day. Leinweber noted that “the majority of these (posts were) placed on Friday when concerns grew.” These types of short cuts tend to push prices up.

In an email to CoinDesk, Joe DiPasquale, CEO of crypto asset manager BitBull Capital, also said that “an exit” from Circle’s USDC stablecoin to bitcoin and Binance’s decision to trade the stablecoins of its recovery funds against bitcoin and ether also led to price increases.

Meanwhile, markets may have been encouraged by what some analysts believe is a more dovish tone from the Federal Reserve, which has been stung by criticism in recent months that it was raising interest rates too much. agressive. Goldman Sachs analysts on Sunday expected no rate hikes at the March 22 Federal Open Market Committee meeting after recent banking tensions, according to a report.

Still, MarketVector’s Leinweber said despite a temporary bailout, sentiment remains “apprehensive and cautious.” He sees concerns about “possible further banking fallout” and companies that “are critical to the industry due to failure to effectively manage cash flow”.

“The bears have expressed their main areas of concern, including that none of the policies solve the fundamental problem of duration mismatch that many of these financial institutions face,” he said, adding: “The ability to borrow as collateral from the Fed at par (rather than at market prices) only helps in times of distress and does not solve the asset/liability mismatch and overreliance on large deposits at zero rate.

In an email to CoinDesk, Joshua Frank, co-founder and CEO of The Tie, an information service provider for digital assets, sounded a cautiously optimistic note.

“The loss of Silvergate, SVB and Signature is devastating for US-based crypto companies,” Frank wrote. “That said, the crypto market has at least temporarily responded well to bailouts. In light of the uncertainty surrounding the banking sector in the United States, the narrative of Bitcoin as a hedge and a safe haven has gained momentum.

Frank added: “While positive in the short term, there are still many long-term macroeconomic factors to be wary of. US regulators are clearly trying to de-bank crypto, the macro environment isn’t looking great, and major financial institutions have gone bankrupt. If crypto – and in particular Bitcoin – is going to continue to rally, we will likely need broad support for this emerging narrative similar to what we saw in 2020/2021 with the halving/inflation hedge narrative. bitcoin.

Ether (ETH), the second-largest cryptocurrency, recently rose more than 7% on Monday afternoon to change hands around $1,675. The Optimism layer 2 protocol native OP token jumped 21% on Monday. LDO, the governance token of the decentralized autonomous organization (DAO) behind the Lido liquid staking system, gained 15%.

The CoinDesk Market Index, which measures the overall performance of the crypto market, rose more than 10% for the day.

Stock markets turned mixed on Monday afternoon: The S&P 500, Wall Street’s benchmark stock index, closed down 0.1%. The Dow Jones Industrial Average (DJIA) slipped 0.2%, while the tech-heavy Nasdaq Composite rose 0.4%.

Investors will be watching Tuesday’s release of the February Consumer Price Index.

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