You may have noticed that Bitcoin and crypto had a messy weekend. Where the price on Friday fell below $ 20,000, it is now back at $ 22,403. That seems to have everything to do with the failure of Silicon Valley Bank, the second largest bank failure in US history. Initially, this resulted in additional declines, but the rescue plan is now on the table and the atmosphere has apparently changed again.
Protect the economy
In a joint statement on Sunday from US Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and FDIC Chair Martin Gruenberg, they said the FDIC is approved to fully protect Silicon Valley Bank clients.
“Today, we are making a bold decision to protect the U.S. economy by strengthening public confidence in our banking system,” the statement read.
If you put it to Mark Connors, the head of research at asset manager 3iQ, asks is this good for risk assets in principle. He adds that there are currently many things going on at the same time, which also somewhat contradict each other. For example, the money supply itself (M2 money supply) is still falling.
2008-esque action
As an investor, you must have heard about the banking crisis of 2008. At the time, the Federal Reserve also had to step in to prevent the markets from going under. “What they announced tonight is the equivalent of what they did in 2008,” Connors said.
In any case, Bitcoin responded well to this statement with an increase of about 9 percent and the rest of the market is also doing well in that regard. It remains to be seen, however, to what extent this remains the case today.
In the long run, these kinds of decisions are at least good for the Bitcoin price. With this, the Federal Reserve once again shows that it will always intervene if too large banks fail. In that respect, there seems to be no saving grace for this financial system, which requires these kinds of actions time and time again.