The cryptocurrency market is volatile, and this week has been no exception. Yet, the financial sector has been more volatile recently, with bank stocks taking a big hit and Bitcoin (BTC) bouncing 17% above crucial resistance lines.
As of March 13, top bank stocks were down double digits, posting deep losses, while BTC rose above $24,000.
Bank Stocks Crash
Interestingly, on March 6, Federal Reserve Chair Jerome Powell warned that while the central bank supports innovation, citizens must be cautious when exposed to crypto assets. Powell cited concerns over “fraud” and “lack of transparency” in the sector.
Despite Powell’s comments about the crypto space, bank stocks have been the first casualties following last week’s collapse of the Silicon Valley Bank.
First Republic Bank, for example, recently announced that it had strengthened its liquidity position through diversification. But this move didn’t spare the bank’s stock from plummeting by 64% overnight.
JUST IN 🚨 Bank stocks in pre-market trade:
Western Alliance Bancorporation down 62%
First Republic Bank down 64%
PacWest Bancorp down 42%
Charles Schwab down 8.52% pic.twitter.com/0uNPxAq72f
— Insider Paper (@TheInsiderPaper) March 13, 2023
Other banks have seen similar losses. Western Alliance Bancorporation is down 62%, while PacWest Bancorp has posted a 42% dip in the same period. The contagion didn’t spare Charles Schwab, which offers financial services. Its stock is down 8.52%.
Meanwhile, Bitcoin has surged 17% in the last trading day, marking a significant reversal of the multi-day decline trend since SVB and Silvergate’s collapse. Ethereum (ETH) increased by 15% in the past 24 hours.
As of March 13, BTC and ETH are changing hands at $24,160 and $1,670, respectively.
USDC Regains Its Peg
Meanwhile, stablecoin USDC has retained its peg after slipping to as low as $0.88 on March 11. Technically, USDC is pegged to the US dollar, meaning its value should remain $1.
However, a sell-off of USDC caused its price to fall below the $1 peg after the issuer, Circle, said it had $3.3 billion of its reserves stuck in SVB.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
Major crypto centralized exchanges proceeded to halt the withdrawal of USDC, which proliferated concerns about the general stability of the cryptocurrency market.
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.
— Coinbase (@coinbase) March 11, 2023
Despite these concerns, Circle has since released details about the USDC reserve, stating that it is collateralized by 77% ($32.4B) with short-dated US Treasury bills. The remaining 23% ($9.7B) is held primarily at BNY Mellon.