Bitcoin and the cryptocurrency markets are facing choppy waters right now, both internally and externally.
Internally speaking, today brings the – some would say inevitable – news that prominent crypto-friendly bank Silvergate Capital has filed for voluntary liquidation.
FTX exposure, once part of its marketing pitch, was ultimately the bank’s downfall, bringing the 27-year-old financial institution to an end.
Few were surprised at the news; pretty much every major client, from Coinbase (NASDAQ:COIN) to Galaxy Digital (TSX-V:GLXY), had jumped ship in the weeks prior as concerns for the bank’s financial health mounted.
There is more to be said on the bank’s collapse, but as for the markets, the concern among investors is that this could spark another bout of crypto contagion. However, as a FDIC-insured financial institution, the situation is hardly the same as FTX, Celsius et al.
External pressures for the crypto markets come in the form of stern warnings from the US Federal Reserve and other major global central banks not to get complacent about the disinflation process.
As Fed chair Jerome Powell said on Tuesday: “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”
This hawkish rhetoric is causing a persistently strong US dollar- in a year where we were supposed to see a retraction, the US Dollar Index (DXY) has surged nearly 3.5% since February 1.
A strong dollar typically means weaker risk assets and as for bitcoin (BTC), that is what we’re seeing right now.
Bitcoin (BTC) nears pre-FTX crash levels – Source: currency.com
After closing another 2.2% lower on Wednesday, BTC/USDT saw further downside this morning, bringing the pair below US$21,700 for the first time in over three weeks.
Binance’s order book suggests a bear advantage in the short term, although buyers’ support at US$21,500 should help to stem losses below that (the caveat being there are absolutely no guarantees).
Tomorrow’s options expiries overwhelmingly favour the bears, unless bitcoin manages to climb above US$23,000. Coupled with the possibility of strong employment data emerging from the US tomorrow (typically a boon for Fed hawks), there could be more headwinds to come for bitcoin this week.
Having dipped 2% by Wednesday’s close, Ethereum (ETH) appears to have stabilised on the ETH/USDT above US$1,530, where a pretty strong support wall on the Binance order book can be seen.
Further buyers’ support is pitched at the flat US$1,500 price point.
In the altcoin space
Global crypto market capitalisation dipped below one trillion dollars for the first time since mid-February, guided lower by heavy overnight losses for the top-20 set, including Polygon (MATIC), Solana (SOL), Avalanche (AVAX) and Uniswap (UNI).
Ripply (XRP) was once again the one outlier, adding over 3% as investors remain optimistic over a positive pending outcome in the SEC v Ripple Labs litigation.
Looking further across the top-200 altcoin set, Kava (KAVA) outperformed the market with a 10% gain, while Toncoin (TON) and OKB added low single digits to their market caps.
Total value locked in the decentralised finance (DeFi) space currently dipped 2% over night to US$47.2bn.
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