Bitcoin has seen a sudden price rebound at the start of the week, rising nearly 10 per cent in the space of a few hours after fears about a potential banking crisis subsided.
The world’s leading cryptocurrency briefly dipped below $20,000 on Friday – its lowest level since the start of the year – following the collapse of crypto-friendly Silvergate Bank and fears about Silicon Valley Bank appeared to spook investors.
Bitcoin rallied after the US government said it would protect customers’ funds, while banking giant HSBC agreed to buy the UK operations of SVB.
The broader crypto market was also boosted by the news, with Ethereum (ETH), Cardano (ADA) and Solana (SOL) also experiencing similar gains to BTC on Monday.
The bounce back pushed the overall crypto market cap back above the $1 trillion mark, though the winding down of Silvergate continues to be a concern for the crypto industry.
Bitcoin’s strong start to 2023 suffered a major setback after Silvergate Bank became the latest casualty of the so-called crypto winter, which has seen the overall market shrink by around $2 trillion.
The California-based bank blamed recent industry and regulatory developments for its downfall, saying in a statement last week that “an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward”.
These industry developments include the collapse of the FTX exchange, while regulatory moves included growing oversight from the US Federal Reserve that could push banking institutions further away from cryptocurrency.
“Silvergate’s collapse has left nearly as big a hole in the US cryptocurrency industry as FTX’s did,” Leo Jakobson from leading crypto price tracker CoinMarketCap wrote in a blog post.
“Without Silvergate, a number of crypto exchanges – Crypto.com among them – are struggling to figure out how to allow customers to move dollars into their trading accounts and off-ramp them into their bank accounts.”