What happened
Momentum continues to build in cryptocurrencies as investors look to alternatives to the traditional banking industry. Regulators and other banks may seem to be making the case for crypto if a few merger rumors come true.
Most of the gains this week were led by the top cryptocurrencies, but now the second tier are jumping as well. At 10:00 ET, Ethereum (ETH -1.22%) is up 4.7% in the last 24 hours, Ethereum Classic (ETC -2.49%) is up 12.7%, Lido DAO (LDO -1.59%) has risen 11.8%, and Solana (SOL -4.04%) is up 7.9%.
So what
The general theme is the same as it's been all week. The collapse of two banks last weekend has caused investors and traders to reconsider how safe deposits are in banks and look for alternatives like cryptocurrencies. One of the cases against crypto has been that banks acted as an onramp and regulators have been shutting down banks with crypto ties or not allowing others to expand crypto offerings.
That thesis got at least a little cold water poured on it over the last few days. The FDIC said it wasn't barring a buyer of Signature Bank from taking over its crypto business. Bids for both Signature and Silicon Valley Bank were reportedly due yesterday and a buyer could emerge by the end of the weekend.
It's ironic that big bank mergers could be good for crypto, but it does make some sense. If the only stable banks turn out to be the huge, systemically important banks, then what's the alternative? Cryptocurrencies seem to be a natural answer.
Now what
Crypto needs to answer what the on and off ramp is to get money into and out of cryptocurrencies. Banks in the U.S. aren't exactly eager to either hold cryptocurrencies or allow crypto businesses to be customers for fear of angering regulators. But around the world, the mood may be thawing.
As U.S. regulators fight crypto, the U.K. and other major countries are building rules that will make crypto more stable. That could attract more users and add value to the ecosystem long-term.
One of the reasons I think these tokens in particular are up right now is they provide more utility than just tokens that store value like Bitcoin. Ethereum can have smart contracts that would be valuable in an alternative financial ecosystem and Lido DAO is a staker that's part of the infrastructure of the ecosystem.
I think Solana is the most interesting crypto asset on this list. It can perform over 100 times more transactions per second than Ethereum and can also deploy smart contracts. If an alternative financial system is, in fact, what emerges after these bank collapses, Solana should play a big role.
