Benzinga - Despite the banking crisis, which included the collapse of Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank, the cryptocurrency market has been resilient, with Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) seeing significant gains in early 2023.
The price of Bitcoin on Monday broke above $29,000, trading at levels not seen since June 2022, while Ethereum is trading above $1,890, its highest range since mid-August of last year. Cryptocurrency analysts see rising opportunities for growth and usage, particularly overseas. However, the cryptocurrency outlook is nuanced. In the U.S., meaningful regulations and oversight are still a bumpy work in progress.
The recent bank crisis and regulatory actions have highlighted the importance of stablecoins and their use as an on-ramp to crypto from fiat. Overall, 2023 is seen as a transition year for cryptocurrencies, with the hope that the crypto market will turn bullish in 2024.
Interview with Brock Pierce, Co-Founder of Tether
Billionaire investor, futurist, philanthropist, economist, and creator Brock Pierce told Benzinga in an exclusive interview that he believes that traditional finance firms are already beginning to invest in Web3 projects. This trend will only accelerate if the banking crisis continues.
Normally, traditional financial markets plummeting has resulted in crypto plummeting, but this could be the beginning of a trend in which traditional finance and crypto markets take a distinct path that shows the unique strengths of decentralized finance.
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BZ: How should the average crypto investor view the bank failures of March 2023?
Pierce: Is it officially time to start panicking? Abandon crypto and everybody start putting money under mattresses?
I'm not sure what the right answer is, but I'm sure abandoning crypto is not the answer. Bitcoin and Ethereum prices are responding positively to the banking crisis, as is gold. I think it's too early to know for sure what will happen.
BZ: Were the banking failures a "crypto event" or an example of traditional finance's shortcomings?
Pierce: I don't think that crypto really had anything to do with this. This was more of a social media and fear-based panic, combined with how the Fed has increased interest rates so many times over the last year, and Silicon Valley Bank had five-year treasuries. They shouldn't have been holding such a long-term paper. As a result, their bond portfolio is upside down, like the short squeeze on GameStop. They weren't marking to market the losses that they've effectively incurred, then combined with panic in the market in a short squeeze sort of event, similar to what we saw with GameStop.
I don't associate this as a crypto-related event, though it has affected some crypto companies. They're not getting bailed out with taxpayer money. They have assets. They just didn't have liquidity. So the government is coming in to assist with short-term liquidity, to avoid greater panic. Still, it's not ultimately going to be paid for by taxpayers.
BZ: As one of the founders of Tether, how do you think this will impact stablecoins – or at least USD-backed stablecoins – in 2023?
Pierce: I don't think that this is going to impact the need and popularity of stablecoins. I think stablecoins are going to continue to have greater interest. I guess the question here is, does this have an impact on Circle (CRYPTO: USDC)? In the long term, it clearly had an impact in the very short term, when people heard funds were frozen, which caused the peg to break. But that's recovered. It may not have any long-term impact. We're dealing with so many existential threats right now. I mean, I'm in Poland right next to Ukraine, and the confidence in the financial system and banking are being impacted in meaningful ways.
BZ: If traditional finance shows this kind of instability, do we have an opportunity for crypto to shine as a globally distributed solution?
Pierce: The big cryptos are performing very well as is gold, in light of everything going on with the banking sector right now. It is one of the few times we've seen this correlation. Normally, the traditional financial markets dropping has caused crypto to drop. This is one of the first examples we've seen of one market crashing and crypto performing, which people would have always thought would be that the outcome of turbulence in the financial markets. It's taken turbulence in the banking sector for it to finally become uncorrelated or breakout, which is not what we've seen historically. Normally, traditional markets plummeting has resulted in crypto plummeting. So this is perhaps the beginning of a trend.
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