Why Cryptocurrencies Are Up Again This Weekend

What happened

Momentum continues to build in cryptocurrencies as investors seek alternatives to traditional banking. Regulators and other banks may appear to be making the case for crypto if a few merger rumors come true.

Most of the gains this week were led by major cryptocurrencies, but now the second tier is jumping as well. At 10:00 a.m. ET, Ethereum (CRYPTO:ETH) is up 4.7% in the last 24 hours, Ethereum Classic (CRYPTO: ETC) is up 12.7%, Pool CAD (CRYPTO: LDO) increased by 11.8%, and Solana (CRYPTO: SOIL) is up 7.9%.

So what

The general theme is the same as it has been all week. The collapse of two banks over the weekend has caused investors and traders to reconsider how secure deposits are in banks and look for alternatives like cryptocurrencies. One of the cases against crypto was that banks acted as an on-ramp and regulators closed banks with crypto ties or did not allow others to expand crypto offerings .

This thesis has received at least some cold water over the past few days. The FDIC said it is not preventing a buyer of Signature Bank from resuming crypto business. Bids for 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 makes sense. If the only stable banks turn out to be the big systemically important banks, then what is the alternative? Cryptocurrencies seem like a natural response.

Now what

Crypto needs to answer what is the on and off ramp to get money in and out of cryptocurrencies. Banks in the United States are not really keen on holding cryptocurrencies or allowing crypto companies to be customers for fear of angering regulators. But everywhere in the world, the atmosphere can thaw.

As US regulators battle crypto, the UK and other major countries are crafting rules that will make crypto more stable. This could attract more users and add value to the ecosystem in the long run.

One of the reasons I think these particular tokens are in place right now is that they provide more utility than simple tokens that store value like Bitcoin. Ethereum may have smart contracts that would be valuable in an alternative financial ecosystem and Lido DAO is a player that is part of the ecosystem infrastructure.

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 banking meltdowns, Solana should play a big role.

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SVB Financial provides credit and banking services to The Motley Fool. Travis Hoium has positions in Ethereum and Solana. The Motley Fool holds and recommends Ethereum, Lido DAO, SVB Financial and Solana. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.