The collapse of the Silicon Valley Bank on Friday has caused market chaos, with many assets experiencing high volatility. The Federal Reserve and US banking regulators stepped in over the weekend to assure investors that they would have access to their funds on Monday. A smaller Bank, Signature Bank, fell victim to the panic created by the SVB collapse later on Friday. The resulting run on the bank’s deposits led to the third-largest bank failure in U.S. history. President Biden and US regulators have sought to limit the damage to the banking system by announcing that the funds of customers of US banks would be protected.
The collapse of Silvergate put pressure on crypto markets last week, driving many major cryptocurrency prices down. The collapse of the Silicon Valley bank, following on the heels of the Silvergate collapse, raised panic in crypto markets over a potential banking crisis. Cryptocurrency prices rallied over the weekend as markets began to stabilize after the initial panic. Major cryptocurrencies soared on Monday mainly due to the news about the government's efforts to protect depositors of Silicon Valley Bank. Expectations of decreased Fed rate hikes also provided support for crypto markets.
Increased Fed rate hike expectations increase global recession concerns and promote a risk-aversion sentiment. Fed Chair Powell’s testimonies before the US Congress last week were more hawkish than anticipated, putting pressure on cryptocurrencies. Powell warned that the US central bank is prepared to accelerate the pace of tightening if price pressures remain high.
Last week market expectations of the Fed’s next rate hike bounced back and forth between 25-bp and 50-bp. Powel’s testimonies raised market odds of a 50-bp rate hike early in the week. The collapse of Silicon Valley Bank on Friday though brought market odds back down to 25-bp. This week some analysts predict that the Fed might even pause rate hikes completely until the crisis is over. The SVB collapse may steer the Fed towards a less hawkish direction, in fear of contagion in the financial sector.
Bitcoin price climbed above the $24,000 level on Monday. If the BTC price declines, further support can be found near $19,500, while resistance may be encountered near $25,200.
Ethereum price followed a similar trajectory, rising to $1,680. If Ethereum's price declines, it may encounter support near $1,460; if it increases, resistance may be near $1,740.
BTC/USD 1h Chart
ETH/USD 1h Chart
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