Today, the situation with cryptocurrencies looks like this. As you can see, in the scale of the day coins gave a significant growth, with the most noticeable with 9 percent increase distinguished Bitcoin.

Analysts believe that traders and investors will turn their attention to altcoins after BTC finishes with a new growth phase.

Which banks have collapsed

At the end of last week, it was announced that Silicon Valley Bank, one of the major banks in the tech startup and crypto space, had officially ceased operations. Having absorbed hundreds of billions of dollars in deposits, SVB was forced to incur a huge loss of $1.8 billion due to consumer funds being placed in mortgage-backed securities, the price of which fell due to a rise in the underlying lending rate.


Recall, the prime lending rate determines the cost of credit issued by a country's central bank to various commercial banks. The higher this rate, the more expensive money becomes and the more the economy shrinks. The Fed has been increasing its key rate over the last year, thereby fighting the inflationary pressures of the massive money printing pandemic at the beginning of 2020.


In the end it had an avalanche effect: bank customers started withdrawing money en masse, which only worsened the situation. An emergency funding round was supposed to take place as a last resort, but it failed.

As a result, the US Federal Reserve stepped in and the ‘Bank Flash Finance Programme’ (BTFP) was announced on 12 March. In tandem with the Federal Deposit Insurance Corporation (FDIC), Fed representatives provided a guarantee of repayment to affected customers.

In the context of everything that has happened, it is the said program that matters most for crypto - some analysts believe that it is "a hidden form of economic stimulus". In other words, the US Federal Reserve will probably have to increase the money supply in order to bail out banks, to which markets usually react by rising.

An example of this took place in 2020. As we have already noted, at that time governments of various countries printed money to help their citizens financially, which led to an increase in the money supply. Some of the money received was probably used for investments, which caused a bull market to kick in for both equities and digital assets. Experts therefore assume a repeat of this situation if government leaders undertake to print cash again.

US Federal Reserve’s shift in priorities

According to Cointelegraph’s sources, given the force majeure in the banking industry, the US Federal Reserve may now dramatically change its strategy regarding the benchmark lending rate. Previously, the Federal Reserve had been steadily raising the rate to fight inflation. Now, according to Goldman Sachs economist Ian Hatzius, things are changing. Here’s the relevant rejoinder.

In light of what’s happening in the banking system, we no longer expect a rate hike by the US Federal Open Market Committee (FOMC) at its next meeting on March 22.

Whilst in theory stopping a rate hike sounds positive, in reality such a change is not so good. In this case, the rate could stop rising to relieve pressure on the same banks and should do so once inflation has been beaten. In the long run, this combination of factors could lead to a recession, i.e. a prolonged downturn in the economy.

Previously, the markets had laid down the possibility of a 0.25 or 0.5 per cent rate hike. The assumed probability of these two events can be estimated in the screenshot below.

Today, March 14, the US will also release the inflation data for February, which is the Consumer Price Index (CPI). There is a theory that if the CPI reading is lower than expected, the markets will have little or no factors to hold them back from a rapid rise on the back of the halt to the base lending rate hike.

What will happen to Bitcoin’s exchange rate?

BTC is trading just above the $24k line this morning. That said, on the scale of the 1-day chart you can see a clear bullish move, with Bitcoin rising from $19,500 in just a couple of days.

Usually after such sharp spikes, a local correction begins on the chart - for a while BTC may fall slightly or walk in a narrow horizontal channel. However, this is hardly the end of the rally. Still, judging by the momentum in the $24,000 zone, there are more than enough people willing to buy Bitcoin.

USDC has regained parity against the dollar

Over the weekend, Circle, the company that issues USD Coin Stablecoin, officially acknowledged that $3.3 billion of its funds are being held by Silicon Valley Bank. The blocking of the money caused investors to panic, who began selling USDC in droves.

This led to a noticeable drop in the value of the Stablecoin – it deviated from $1. The USDC lost almost 20 per cent of its value in the moment. As it is one of the market’s biggest stablenecoins, what is happening to it could call into question the new rally in crypto and the credibility of the digital asset industry as a whole.

One trader was in such a hurry to exchange his USDC for other stackablecoins that he lost the equivalent of $2 million. However, there is still a chance to recover some of that amount. Read more about the situation in a separate article.

Luckily, everything worked out and yesterday the USDC value returned to parity with the US dollar. On 12 March Circle CEO Jeremy Allaire confirmed that BNY Mellon and an unnamed new banking partner will take SVB’s place. In other words, the situation remains stable and the USDC has not become a source of negative news in the long term.


It looks like there may now be a shift in the world's attitude towards cryptocurrencies. Yes, they are still volatile, but today banks no longer seem as reliable as they used to be. Accordingly, investors may opt for decentralised assets with limited inflation, which behave predictably and without additional issuance in every crisis. And that will mean a massive influx of capital into coins, which will benefit their early buyers.