Bitcoin (BTC) refused to let $20,000 support die for good on March 11 as the weekend opened with a battle for lost ground.
Bitcoin shakes up USDC depeg
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hovering around $20,200 at the time of writing.
A brief dip below $20,000 overnight was short-lived, and the mood appeared more stable that day as the initial wave of panic over the stability of US banks subsided.
The collapse of SVB Financial, which followed Silvergate in dealing another blow to some crypto firms, nevertheless continued to happen.
At the heart of the debacle this time was Circle, the Blockchain firm which overnight revealed that it had lost part of the reserve funds of its stablecoin, USD Coin (USDC) with SVB.
The USDC immediately began to slide from its peg to the US dollar and at the time of writing was only redeemable for $0.91, while at one point Bitcoin was worth over $26 $000 in USDC terms on the major Kraken exchange.
“If USDC is only 90% supported, the equilibrium price is NOT $0.90. The equilibrium price is ZERO,” Cory Klippsten, CEO of Swan Bitcoin, reacted.
“Everyone is incentivized to trade ASAP for $1. You don’t want to be in the bottom 10%, with all the money already gone.”
Others thought the situation was manageable and that USDC, the second-largest stablecoin by market capitalization, would not fail completely.
In a TweeterCircle itself said it has five other banking partners to manage its USDC cash reserves.
Funding Rates Mimic FTX Mood
Beyond USDC, traders’ nerves remained predictable.
Related: Circle’s USDC instability causes domino effect on DAI and USDD stablecoins
Average funding rates were at their most negative since the fallout from FTX in November 2022, indicating strong belief that further losses could still come in for Bitcoin.
Analyzing the implications, however, commentator Tedtalksmacro argued that a crushing bearish bias could fuel a classic “short squeeze” to the upside on BTC/USD.
“The market is still very short here. And this could provide fuel for BTC to test at least 21.4k in the short term,” part of a tweet read.
Tedtalksmacro added that pressure is already “well underway” based on Bitcoin’s rebound from multi-week lows below $20,000.
Other popular market players favored a short-term bearish return.
“Amidst the madness today, Bitcoin remains strong. I expect another drop to the tentative support zone around $19,200,” Crypto Tony said followers.
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