Stress in the banking sector could be a positive argument for cryptocurrencies. Here’s how

By Frances Yue

Hello! Welcome back to Distributed Ledger. This is Frances Yue, crypto reporter at MarketWatch.

A lot has happened in the past week — California’s Silicon Valley Bank (SIVB) collapsed in the second-biggest banking meltdown in US history, and New York’s Signature Bank (SBNY) was shut down by state regulators. Both came days after crypto-friendly Silvergate Bank (SI) announced it was ceasing operations.

The Federal Reserve announced an emergency lending program on Sunday to support depositors at both institutions and across the banking system.

Still, investors remain concerned about other banks. First Republic Bank (FRC) shares lost about a third of their value on Thursday after Bloomberg reported that the bank is reviewing its strategic options, including a possible sale of the company. The stock calmed down after the Wall Street Journal reported that the largest banks in the US are discussing a joint lender bailout.

Meanwhile, Credit Suisse (CSGN.EB) said on Thursday it would borrow up to $54 billion from Switzerland’s central bank to boost its liquidity after its stocks and bonds slumped on Wednesday.

Amid these tensions in the banking system, bitcoin has staged a notable rally, surging over 30% in three days from around $20,000 on Sunday to over $26,000 on Tuesday, before declining slightly to trade slightly below $25,000 on Thursday, according to CoinDesk data .

As always, find me on Twitter @FrancesYue_ to share your thoughts on crypto, this newsletter, or your personal stories using digital assets.

Bitcoin Bullish Catalyst?

The recent collapse of several banks has highlighted the potential use cases for blockchain technology, said Akbar Thobhani, chief executive at sFOX.

“What blockchain does is that it brings two people together who really have no reason to trust each other to be able to transact, knowing the transaction will go through,” Thobhani said in a call.

“In general, banks meet this need when you trust the bank to hold your money and to transact. But if that confidence falters even slightly, we’ve seen what’s happening to the banks in less than 48 hours,” Thobhani said.

Bitcoin in particular has shown resilience in the recent turmoil, which may support the argument that while crypto is not a hedge against inflation, it is a shield against “monetary irresponsibility,” analysts at crypto trading firm QCP Capital wrote in a note Thursday.

Thobhani attributed Bitcoin’s recent rally in part to some investors’ confidence in the battered banks.

Last weekend, some investors were unsure which banks are safe. “I think a lot of people chose crypto so they could withdraw the coins over the weekend if needed, rather than waiting until Monday morning when the banks come online with all the uncertainty,” Thobhani said.

Crypto trades 24 hours a day, seven days a week, while banks are typically closed and do not process payments on weekends and public holidays.

Of course, Bitcoin is still highly volatile — crypto prices are down more than 60% from their all-time highs set in 2021, according to CoinDesk data.

And the crypto industry is not isolated from the problems in the banking sector.

Collapsed Silvergate, Signature and Silicon Valley Bank were all once considered the most crypto-friendly banks in the US, although Signature cut its crypto-related deposits following the FTX collapse in November.

“The landscape [of banking for crypto] has definitely changed,” said Bobby Zagotta, Chief Executive at Bitstamp USA.

The collapse of Signature and Silvergate could make it harder for institutions to buy cryptocurrencies with fiat currencies and limit liquidity on crypto trading platforms. MarketWatch’s Anushree Dave and I wrote more about it here.

Crypto in a snap

Bitcoin is up 17.6% over the past week, trading at around $24,750 as of Thursday, according to CoinDesk data. Ether is up 12% over the same period to around $1,662.

Biggest gainers  Price  %7-day return 
Halo Coin        $0.06  92.7% 
Conflux          $0.29  53.7% 
Stacks           $0.89  42.7% 
SingularityNET   $0.49  36.9% 
The Graph        $0.16  24.5% 
                        Source: CoinGecko 
Biggest Decliners  Price    %7-day return 
Maker              $726.95  -16.8% 
Huobi              $4.09    -15.4% 
Dash               $53.09   -9.1% 
Frax Share         $8.24    -7.9% 
OKC                $23.77   -7.6% 
                            Source: CoinGecko 

Crypto companies, funds

Coinbase Global Inc. (COIN) shares are up 16% on the week to around $67.33. MicroStrategy Inc. (MSTR) is up 14.4% so far this week at $241.25.

Crypto mining company Riot Blockchain Inc. (RIOT) rose 27% to $7.04 on Thursday. Shares in rival Marathon Digital Holdings Inc. (MARA) are up 39% over the past week to $7.65. Ebang International Holdings Inc. (EBON) has traded up 12% over the past week at around $6.74.

Overstock.com Inc. (OSTK) shares fell 0.9% on the week to $17.93.

Block Inc. (SQ), formerly known as Square, is up 2.6% for the week to date at $75.69. Tesla Inc. (TSLA) shares were up 7% at $184.99.

PayPal Holdings Inc. (PYPL) stock fell 2.2% over the week to trade at around $74.25. Nvidia Corp price (NVDA) is up 8% over the past week at $253.06.

Advanced Micro Devices Inc. (AMD) shares were up 14% on the week at $96.03.

Among crypto funds, ProShares Bitcoin Strategy (BITO) is up 25% on the week to $15.36 on Thursday, while its counterpart Short Bitcoin Strategy ETF (BITI) is down 24% to $24.03. The Valkyrie Bitcoin Strategy ETF (BTF) is up 25% over the past week to $9.81, while the VanEck Bitcoin Strategy ETF (XBTF) is up 25% to $25.

Grayscale Bitcoin Trust (GBTC) is up 21% over the past five days to $14.06 on Thursday.

-Frances Yue

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3/18/23 1505ET

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