Another crypto-friendly bank has collapsed following the collapse of Signature Bank in New York. But according to the industry, cryptocurrency is now unstoppable.
The crash over the weekend is the latest in a series of bank failures that have rocked global financial markets, and many fear a major banking crisis is brewing. The crisis hit the crypto industry particularly hard, as Signature is seen as a key bank for companies operating in the sector.
Despite assurances from Treasury Secretary Janet Yellen that “strong action” was being taken to bolster confidence in the banking system, shares of major US banks fell sharply in early morning trading on Wall Street.
The plunge in share prices across the sector intensified after President Joe Biden made comments in a Monday morning speech that some members of the cryptocurrency community said did not calm the markets.
A series of bank bankruptcies
Signature Bank’s troubles come shortly after two other crypto and tech banks, Silvergate Capital and Silicon Valley Bank, went bankrupt before the weekend.
Silvergate Capital is known as one of the most crypto-friendly banks in the US, and the bank has worked with many of the most prominent crypto companies, including Michael Saylor’s MicroStrategy. The bank was hit hard by the fall in FTX last November, and it suffered an inflow that forced it to sell $5.2 billion worth of debt securities at a loss.
Silicon Valley Bank, on the other hand, is known as an important banking partner for California startups and venture capitalists, and was used by issuer USDC Circle. The bank failure is now the second largest bank failure in US history.
The government promises to improve the health of depositors
Technically, Signature Bank’s closure is the result of government action, when regulators forced the bank to close on Sunday.
As part of the regulators’ action, all of the bank’s depositors will be made whole, similar to what the government said about Silicon Valley Bank depositors. In addition, US regulators claimed in a joint statement that taxpayers will not suffer losses.
“Shareholders and certain holders of unsecured debt will not be protected. Senior management was also removed. Any losses of the Individual Deposit Guarantee Fund to support uninsured depositors will be compensated through a special assessment of banks in accordance with the requirements of the law,” the message reads.
US crypto companies
The collapse of Signature and Silvergate was a major blow to the crypto industry, particularly in the US, where many companies relied on the two banks for important functions.
Among those who have weighed in on the situation, bitcoin-focused venture capitalist Nick Carter hinted in tweets over the weekend that the government is deliberately targeting the crypto sector by closing banks.
It’s the “decapitation” of the industry by the banks, he said, adding that “every crypto bank is closed.”
In subsequent tweets, Carter doubled down on the same point, saying he had heard from multiple sources that Signature Bank’s shutdown was because regulators “wanted to kill the last big pro-crypto bank.”
Others, like Messari Crypto CEO Ryan Selkis, remained upbeat, saying it would be “difficult, if not impossible” to kill the cryptocurrency, which he called “an idea whose time has come.”
Bitcoin is seeing significant growth
However, despite the negative stance of companies in the crypto industry, spot bitcoin prices continued to rise sharply on Monday, possibly as investors seek safety from failing banks.
“[I] find this BTC [price action] extraordinary today,” popular economist and crypto trader Alex Kruger said on Twitter on Monday, noting that the rally appears to be “mostly spot-on.”
As of press time at 17:45 UTC, Bitcoin is up a whopping 16% in the last 24 hours to a price of $24,190. Ethereum’s native token ETH rose 10% to $1,679 over the same period.
