Bitcoin and Ether started the trading day in Asia in the red, with Bitcoin falling 2.5% to $24,330 and Ether falling 3.7% to $1,649.
Liquidity is on everyone’s mind, especially in the face of record withdrawals from the general account of the Treasury during the Covid era, and even more so after the bankruptcy of Silicon Valley Bank.
More recently, something seems to have spooked the Federal Deposit Insurance Corp as it replaced $40 billion in funds it took from the TGA, originally intended to help mitigate market disruption following the shutdown of SVB.
As Reuters recently reported, over the past week the TGA fell nearly $100 billion before the FDIC returned its $40 billion.
“The TGA has been reduced throughout 2023 and that has helped markets in general, including bitcoin. But at the end of the last five days, the TGA had nothing to do with Bitcoin outperforming,” Mark Connors, head of research at 3iQ, told CoinDesk in a note. “There’s a little more confidence that bitcoin’s thesis is not only intact, but has been validated at a level we’ve never seen before.”
Connors says it’s a matter of confidence for the Fed.
“When you see the Fed creating a bubble, bursting the bubble and then not knowing what game to play with inflation, or stabilizing financial markets, that doesn’t inspire confidence,” he continued.
A bigger issue at hand is rate volatility, according to Connors, and the market hates uncertainty.
“The reason it matters is because rates are used to price every asset on the planet,” he said. “And when you have uncertainty about interest rates, you have uncertainty about what everything is worth.”
The next meeting of the Federal Open Market Committee is scheduled for March 21-22.
Bitcoin, Ether Volatility Stuns Bears and Bulls
Higher than usual market volatility affected both bulls and bears as crypto futures racked up $300 million in liquidations over a 24-hour period on Wednesday.
Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or full loss of the trader’s initial margin. This happens when a trader is unable to meet the margin requirements for a leveraged position (does not have sufficient funds to keep the trade open).
Large selloffs can signal the local high or low of a large price move, which can allow traders to position themselves accordingly.
Bitcoin and ether briefly rose above $26,000 and $1,770 respectively on Tuesday as investors brushed off the long-term effects of a regulatory crackdown on crypto-friendly banks and index data consumer prices (CPI) indicated a slowdown in inflation in the coming months.
Bitcoin’s weekly chart shows the cryptocurrency once again struggling to establish itself above $25,000, which capped gains last month and into August 2022. According to Certified Market Technician Aksel Kibar , a break above $25,000 would shift focus to the next hurdle at $28,600. Christine Lee, host of “All About Bitcoin”, breaks down the “chart of the day”.
But the euphoria was short-lived as the two major tokens fell 5% from Tuesday’s highs before gradually stabilizing. On Wednesday morning in Asia, bitcoin was trading just below $25,000 while ether was trading slightly above $1,700.
The volatility led to losses of more than $140 million in bitcoin futures and $80 million in ether futures. Of this total, 58% of futures losses came from short positions or bets against price increases, while the rest came from long positions or bets on price increases, meaning that short sellers and long traders were hit almost evenly.
Among other major tokens, Conflux’s CFX and Filecoin’s FIL token futures had $8 million and $5 million in liquidation, respectively, as trading volumes for both surged on fundamental developments.
Meanwhile, some market watchers said the price action came as investors searched for alternative assets following the collapse of Silicon Valley Bank last week.
“Bitcoin’s rally to a new yearly high as Silicon Valley Bank tumbles and inflation remains stubborn shows that investors are looking for Bitcoin’s stability in highly uncertain market conditions,” said co-founder Alex Adelman. from the Bitcoin Lolli rewards app, to CoinDesk.
“While many have viewed bitcoin as a hedge against inflation and tracked its price movements accordingly, bitcoin’s relationship with traditional finance is more complex,” Adelman said, adding that bitcoin operated as a ” alternative to the traditional financial system as a whole”.
“The weakness in the banking sector has heightened investor awareness of bitcoin’s unique value proposition. In the weeks ahead, we will continue to see increased demand for bitcoin as a superior system for securely holding and transferring money. “, said Adelman.
According to data from TradingView, the bitcoin (BTC) dominance rate has climbed amid growing turmoil in the crypto markets. It came as the Federal Home Loan Bank of San Francisco said it did not force Silvergate to repay the advances, which would have been the reason crypto-focused Silvergate decided to shut down. . Lyn Alden Investment Strategy Founder Lyn Alden and Dunleavy Investment Research Crypto Strategist Tom Dunleavy have joined “First Mover”.