Bitcoin (BTC), Crypto Prices Rise as SVB Depositors Protected

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Jakub Porzycki | Nurphoto | Getty Images

Cryptocurrencies rallied on Monday as the US government moved to protect depositors at the bankrupt Silicon Valley Bank and HSBC bought the UK arm of the lender.

Bitcoin was last up 5% at $22,374.68, according to data from Coin Metrics. Ether rose 2% to $1,585.58.

The overall cryptocurrency market gained more than $70 billion in the 24 hours to 2 a.m. ET, rallying above $1 trillion on Monday.

It has been a roller coaster ride for the crypto markets following the collapse last week of Silvergate Capital, a major lender to the crypto industry. Silvergate announced on Wednesday that it was ceasing operations and liquidating its bank.

Then came the collapse of Silicon Valley Bank on Friday in what was the biggest bank failure since the 2008 financial crisis.

Silvergate and SVB put their money in US Treasuries which lost value when the US Federal Reserve raised interest rates. These banks were forced to sell these bonds at a loss to shore up their capital.

This was followed on Sunday by the closure of Signature Bank, a major lender to the crypto industry, by US regulators to stem any contagion to the wider banking sector.

These steps taken by regulators to create a safety net for SVBs and protect depositors in these institutions have boosted investor confidence.

The US Treasury, Federal Reserve and Federal Deposit Insurance Corporation said Sunday that SVB depositors will have access to all their money starting Monday.

“No loss associated with the Silicon Valley Bank resolution will be borne by the taxpayer,” the regulators said.

Signature Bank depositors will be “cured”, they added.

“Given the Fed’s announcement over the weekend of a safety net for banks and in particular Silicon Valley Bank, markets have become euphoric knowing that depositors’ money is safe and a major potential bank run has been averted,” Vijay Ayyar, vice president of business development and international at crypto exchange Luno, told CNBC via email.

On top of that, HSBC said it had agreed to acquire the UK arm of SVB for £1 ($1.21). The UK Treasury said on Monday that “no taxpayers’ money is involved and customer deposits have been safeguarded”.

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