Bitcoin Jumps to $24,000 As Stablecoin Fears Ease
- U.S. administration’s emergency measures supported USDC and boosted Bitcoin.
- Falling Treasury yields provided additional support to cryptocurrencies.
- Fed is expected to cut rates by the end of the year, which is bullish for crypto.
Bitcoin Tests $24,000 Levels As Traders Calm Down
Bitcoin rallied towards the 24,000 level as traders reacted to U.S. plans’ to limit contagion from the failures of Silicon Valley Bank and Signature Bank. Markets feared that problems of these banks may lead to a massive bank run, which would push other regional banks into bankruptcies.
Last week, crypto markets found themselves under strong pressure as traders weighed the probability of another FTX-like event amid problems of the crypto-related banks.
The cryptocurrency firm Circle, which issues a popular stablecoin USDC, had a $3.3 billion reserve deposit held at Silicon Valley Bank. The market feared that Circle may lose this money, and USDC depegged from USD.
However, the emergency measures of the U.S. administration, which included protections for all depositors, provided significant support to USDC, which returned to parity with the U.S. dollar.
USDC Depeg Boosts Bitcoin
Traders moved their funds into “native crypto” after USDC depeg. As a result, Bitcoin rallied from the $20,000 level to the $24,000 level in just two days.
The key question is whether crypto traders will focus on stablecoin-related risks in the longer-term. If traders decide that stablecoin-related risks are rising despite U.S. efforts to limit contagion from the failure of several regional banks, Bitcoin may get more support.
Falling Treasury yields have also boosted Bitcoin and other cryptocurrencies. The yield of 2-year Treasuries moved from the 5.00% level to the 4.00% level in less than a week.
The market expects that the Fed will have to start cutting rates by the end of the year, which is bullish for cryptocurrencies.
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