Crypto Bank Signature Is Latest Financial Closure

Another major bank has closed. This time, the victim is crypto institution Signature Bank, which is the last major digital currency bank in the U.S.

Signature Bank Is Latest Financial Firm to Shut Down

The fall of Signature is the third major crumbling over the course of a few weeks. The first was Silvergate, which was later followed by Silicon Valley Bank. The real scary aspect regarding Signature was that it housed many of the world’s USDC units, which is a stable currency created by crypto platform Circle. Many of Circle’s reserves were stored in Signature, and the trouble surrounding the bank caused the digital currency to lose its dollar peg.

USDC is tied to the U.S. dollar. That’s what gives it its “stable” position. $1 in USDC is worth $1 USD. However, the collapse of Signature caused the asset to lose its peg over one weekend in mid-March. The currency has since regained its peg, but there was a lot of concern and worry surrounding USDC given it was long considered one of the most stable digital assets in the world.

Noelle Acheson – economist and writer of the “Crypto is Macro Now” newsletter – explained in a recent interview:

A slower hiking pace and a lower terminal rate, plus the likely injection of liquidity to prop up banks struggling to meet withdrawals (through the Bank Term Funding Program) imply greater market liquidity, even if this could be partially offset by higher volatility. Bitcoin is one of the most sensitive assets to market liquidity, since its ‘risk’ profile is unencumbered by earnings or ratings concerns.

Sylvia Jablonski – CEO and chief investment officer of Defiance ETFs – also threw her two cents into the mix about both Silicon Valley Bank and Signature, commenting:

Both banks had little diversification. With high risk often comes high reward, however, if the balance sheet behind the system crashes – while you have a Fed removing liquidity from the system and hiking rates – crypto startups and venture capitalists may have a long road to recovery. It is a complex matter in the near term. News of the Fed creating a backstop helped to bolster equities and crypto overnight, however. As panic sets in, we will have to see how today’s market holds up.

Bitcoin Is Doing Well

The good news is that despite such a mess taking hold in recent weeks, the crypto scene is doing quite well at the time of writing. Bitcoin, for example, is up more than 18 percent during the moment this article is being composed. The asset previously fell into the mid-$19K range but has since shot up by more than $5,000 and is trading for over $24,000.

If anything, this is an opportunity for bitcoin and other assets to show how strong they have become. Perhaps the final remnants of 2022 are on their way out.

Tags: bitcoin, Signature Bank, Silicon Valley Bank