Crypto Market Rallies on FDIC Banking Intervention, USDC Regains Dollar Peg

The market cap of all cryptocurrencies is back above the $1 trillion mark.

After a joint statement from the Federal Reserve, U.S. Treasury, and FDIC declared that all depositors of now-shuttered Silicon Valley Bank and Signature Bank will be able to get their funds out on Monday, the battered crypto market turned green.

Late on Sunday night, Bitcoin (BTC) was up to $22,300 and Ethereum (ETH) was at $1,596, both up around 8% in the past 24 hours, according to CoinMarketCap price data.

Top-30 coins Cardano (ADA), Polygon (MATIC), Solana (SOL), Litecoin (LTC), Avalanche (AVAX), and Filecoin (FIL) were all up by more than 10% as well.

Conversely, the news seemed to prompt hesitation in traditional financial markets, with the U.S. dollar dipping in early Monday trading.

US Dollar Coin (USDC), the market’s No. 2 stablecoin, regained its dollar peg, returning to a price of 99.3 cents on multiple price indices. USDC had plummeted to a new all-time-low of 87 cents on Friday night after USDC issuer Circle disclosed that it still had $3.3 billion of the cash reserves backing USDC sitting in Silicon Valley Bank.

The weekend slump shook confidence in USDC and other stablecoins like USDD, USDP, and prompted doubts about the viability of stablecoins broadly. It isn’t yet certain those doubts are quelled just because USDC has rebounded.

The current banking chaos and contagion arguably began barely more than a week ago when crypto-friendly Silvergate Bank showed signs of trouble. After numerous crypto companies that used Silvergate (including Coinbase, Galaxy, Gemini, and Crypto.com) said they would stop using it, Silvergate shut down its Silvergate Exchange Network. By Wednesday, Silvergate said it would wind down its operations.

Just two days later, on Friday, the Nasdaq halted trading of Silicon Valley Bank, which experienced a $42 billion bank run the day before and was reportedly seeking an emergency acquisition. Within hours, regulators had shut down SVB, prompting bank and tech stocks to take a dramatic hit amid fears other regional banks would be in trouble. Multiple crypto and tech startups publicly announced whether they had money in SVB. Then on Sunday, New York State financial regulators abruptly shut down Signature Bank, citing system risk.

Finally, the announcement on Sunday evening of aid from the Fed, Treasury, and FDIC appears to have stanched the bleeding in crypto and stocks for now: S&P and Nasdaq futures were up sharply in pre-market trading.