Bitcoin’s return to the days of January
Bitcoin returned to January levels on Thursday, diving below $20,000.
The largest cryptocurrency by market capitalization recently traded at $20,067, down 7.7% in the past 24 hours as nervous investors fretted about continued inflationary pressures, the fallout from the implosion of crypto-friendly Silvergate Bank and most recently a lawsuit in New York State alleging that ether and other cryptos are securities. BTC has now erased about half of its gains from a brisk first six weeks of the year, when investor hopefuls sent the crypto up about 40% and over $25,000 in mid-February.
“There are a lot of people who are afraid that the domino effect might just be starting,” said Eddy Gifford, an asset manager for investment advisor Tactive. “There’s FTX, now Silvergate, who’s next? We also had news from the Fed where (Fed Chairman Jerome) Powell was very aggressive about raising interest rates probably higher than anyone expected — and possibly to In those situations, risk assets generally tend to fall because valuations are a function of the ability to meet estimates and the interest rate environment.”
He added: “So if the interest rate environment stays high for longer, that will push prices down.”
Ether roughly matched bitcoin’s plunge to change hands at around $1,430, its lowest level since mid-January. Other major cryptocurrencies were firmly in the red with CRO, the token or exchange Crypto.com down 7.6% and popular meme coins DOGE and SHIB both down more than 8%. The CoinDesk Market Index, a measure of the performance of the broader crypto market, fell 7.5%.
The sour mood in the crypto markets has also manifested itself in the liquidations of approximately $307 million of crypto traders in the past 24 hours, according to data from Coinglass. Bitcoin (BTC) traders suffered the biggest losses, around $112 million, while ether (ETH) liquidations exceeded $73 million. Of the liquidated trading positions, approximately $282 million were longs with bets on higher prices.
Meanwhile, stock markets stumbled amid a massive sell-off in bank stocks that sent JPMorgan Chase and Bank of America down more than 5% and 6%, respectively. The technology-focused Nasdaq fell 2.1%, while the S&P 500 and Dow Jones Industrial Average (DJIA) fell 1.8% and 1.7%, respectively. The downturn came even as jobless claims rose slightly, a mildly encouraging sign given the tight labor market that has pushed prices higher.
Tactive’s Gifford said that if bitcoin breaks $20,000, “we can go to $15,000 pretty quickly,” and if we break through $15,000, we’ll go to $10,000 quickly. But he noted bitcoin’s staying power and will halve next year. “That has typically been a spark for bitcoin bull markets,” he said.
He added: “We’ll see a few more companies fall, but that’s just going to make the ones that are left behind stronger. And I think that calls for wider adoption of digital assets in general.”
Futures contract holders remain unbowed
The average funding rate for perpetual futures contracts in both bitcoin and ether remains positive despite recent concerns about market turmoil. Financing rates are set by exchanges and regulate the price of futures contracts relative to the market value of the asset.
Positive funding rates indicate optimistic sentiment as holders of long positions pay short. The opposite is true when funding rates are negative.
BTC funding rates have been positive since February 13, with the exception of a negative dip on March 5.
Crypto-friendly Silvergate Bank will “voluntarily liquidate” its assets and wind down operations, its holding company, Silvergate Capital Corp., said Wednesday. Jim Bianco, president and macro strategist of Bianco Research, LLC, and Octavio Marenzi, CEO and founder of Opimas, LLC, discussed the latest developments. Additionally, Crypto Critics’ Corner Co-host Bennett Tomlin discussed the recent Wall Street Journal report that the company behind the world’s largest stablecoin accessed bank accounts through falsified documents and intermediaries.