Cryptos recover losses from Silicon Valley Bank collapse

Cryptocurrencies recover from losses after the weekend. The digital asset market recovers most of the losses caused by the collapse of Silicon Valley Bank (SVB). Bitcoin (BTC) is back around $22,500, while Ethereum (ETH) is trading around $1,600.

From a technical point of view, the loss of $21,000 and the attack on the key $20,000 area for Bitcoin is bad news for the crypto queen. According to Javier Molina, senior market analyst at eToro, this level is of "maximum relevance" because if it is lost "it opens the direct path to the $18,800 area first and $17,500 later." "Volatility is upside without reaching extreme highs while, on the sentiment side, it moves into the fear zone. Strength at $20,000 should work unless we have bad macro data," he added.

In any case, there seems to be a consensus that macro data, including the important US inflation reading due on Tuesday, matters less than developments in the banking sector. The Biden Administration has come to the rescue of depositors at the failed Silicon Valley Bank and bank regulators approved a plan yesterday, on Sunday, to give them access to their money.

The contagion has spread to Signature Bank, the most important bank for companies in the crypto sector, which has been closed by regulators because of the systemic risk it poses to the U.S. financial system. According to the Treasury and the Fed, depositors will also have access to their money. As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.

The collapse of SVB has completely changed the landscape. So much so, that numerous experts are saying that the Federal Reserve (Fed) will not only change its rate expectations, but that a 50 basis point hike this month seems completely off the table. This what analysts at Goldman Sachs believe, for example, as they stress that they will not even test a 25 basis point hike.

"Activity in Fed funds futures now assesses more than 98% chance for a 25bp hike in March, not because the US jobs data was soft enough to overhaul rate hike expectations last Friday, but because the Fed can’t ignore the issues caused by the steep interest rate increases in the banking sector and can’t afford to trigger a financial crisis to bring inflation back to 2%," explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"The Fed may want to think twice before stepping on the gas this month; Mr. Powell certainly doesn’t want to go down in history as the clumsiest Fed President in the history of the Fed," she added.

In other market news, most assets have recovered the losses incurred after SVB's fall. Cardano (ADA), for example, soars 11% and Solana (SOL) rises 9%.