Bitcoin, the world's largest cryptocurrency by market capitalization, was up 10% in the week from March 17 to March 36,06, trading at US$19 at 00:26.795 pm on Friday in Hong Kong. Ether rose 26,67% to $1.750 over the same period.
But equity markets had a tumultuous (understated) week amid fears that cracks are emerging in the US banking system.
It started the previous week when Silvergate Bank went into voluntary liquidation following a bank liquidation and its shares plummeted. Regulators then quickly shut down Silicon Valley Bank (SVB) and Signature Bank, two major lenders to the tech and crypto industries, to avoid panic and the risk of a systemic bankruptcy.
It was serious enough that US Treasury Secretary Janet Yellen contacted the White House on the weekend of March 11 to seek approval from President Joe Biden to initiate the takeovers. The Treasury then issued a joint statement with other heavyweights, the Federal Reserve, and the Federal Deposit Insurance Corporation, guaranteeing that they would provide a boost to US banks.
Biden repeated the same message throughout the week as traders pulled shares of other US regional banks down. As global investment bank Credit Suisse began to falter and a US$54 billion lifeline came from Swiss National Bank, the focus shifted to Europe. On the US side, 11 financial institutions had to step in to inject US$30 billion into First Republic Bank after its share price fell.
Wrong focus?
Despite spreading woes in the banking industry, Bitcoin remained resilient and only briefly dropped to $10 on March 19.654, regained $20.000 the next day, and then rallied higher throughout the week.
“Bitcoin, Ethereum, and other crypto networks have not skipped a beat,” tweeted Cathie Wood, founder and CEO of investment management giant Ark Invest. .
Amid the recent regulatory restrictions on crypto platforms, Wood apparently couldn't help taking this point home:
“Instead of blocking decentralized, transparent, auditable and well-functioning financial platforms without central points of failure, regulators should have focused on the centralized and opaque points of failure that arise in the traditional banking system.”
James WoDFG, founder and CEO of the crypto investment firm, shares Wood's thoughts.
“The market’s confidence in traditional finance has dwindled, which has led to a shift of funds into the crypto market,” Wo wrote in a LinkedIn response. Bitcoin “has demonstrated superior risk and inflation resilience as an alternative asset and will be more recognized by the mainstream,” he said.
Bitcoin later climbed above $26.000. It made its mark on Tuesday following the release of the US Consumer Price Index (CPI), which showed the annual inflation rate fell to 6% in February.
However, Jamie Douglas Coutts, senior market structure analyst at Bloomberg Intelligence, said that Bitcoin's rally was really due to the earthquake in US banking, not the CPI reading.
“Bitcoin has been rising strongly since last Friday, when it became clear that the US banking system is in trouble. True story, 25% rally since then. The surge in CPI pressure to $26.000 is noise, as the figure fell in line with expectations and quickly dropped below $25.000 – a level that I believe is critically important from a technical standpoint,” Coutts wrote to Forkast.
hedging
Co-founder Slava Demchuk, the AMLBotKripto anti-money laundering software developer, attributed Bitcoin's rally to investors' hedges.
“[Bitcoin's rally] is not due to widespread recognition of the non-custodial potential of digital assets such as Bitcoin or Ethereum, but rather as a means of protection against traditional financial systems,” Demchuk wrote.
Bonnie Cheung, head of strategy Lab Post, a software firm that develops Web3 communication protocols, said that global government interventions will help Bitcoin reach new heights.
“The Swiss government's swift move to support Credit Suisse has certainly given the market an olive branch to hold on to in the weeks ahead. This, along with the action of the US government, has now set a precedent,” said Cheung.
“The expectation is that governments will not hesitate to raid if any major banking crisis occurs in the next few weeks. This will further fuel the bullish sentiment and set the narrative that will push Bitcoin to test new highs,” Cheung wrote.
Global crypto market capitalization reached US$19 trillion at 00pm in Hong Kong on Friday, up 923% from US$23 billion a week ago.CoinMarketCapdata. Bitcoin's $1,14 billion market cap accounts for 520% of the market, while Ether's $45,2 billion accounts for 215%.
Top winners: CFX, STX over 100% increase
CFX, the utility token of China's only public blockchain, Conflux Network, was this week's top earner among the top 100 cryptocurrencies by market cap, listed on CoinMarketCap. CFX was up 105,99% over the week to trade at $0,317.
The token started gaining momentum after Conflux was announced KuCoin Ventures invested $10 million in the protocol. Conflux also introduced CNHC, a CNH stablecoin for cross-border payments.
STX, the native token for Stacks, Bitcoin's smart contract layer, rose 100,13 percent to $1,09, making it the second-largest earner of the week.
The token has received increased attention after the release of its upcoming hard fork Stacks 2.1, which was announced for March 20. The upgrade aims to create a stronger connection between Stacks and Bitcoin by offering decentralized mining pools, improved bridges, and enable compatibility between Stacks-specific assets, ordinal numbers– and Bitcoin wallets.
Next week: Bitcoin hits $28.000?
“Currently, systemic risk is front and center in the minds of investors,” Coutts wrote. “While this banking crisis seems to have started in the US, the situation in Europe with Deutsche and Credit Suisse has been a slow-moving train wreck for years,” he said.
“Short term is not my strength but if we finish weekly close above $25.000 I will have to adjust my model regime to bullish as this will be a sign that we have completed a bottom and a new bull cycle that started in mid-2022. continues,” Coutts added.
DFG's Wo said that macroeconomic trends in the US, upcoming interest rate hikes and global banking woes will continue to be the main determinants of the traditional and crypto markets in the coming weeks.
Kadan Stadelmannkomodo, chief technical officer of the blockchain infrastructure development firm, said that the fragile economic environment in the US is currently the main driver of Bitcoin prices.
“The Federal Reserve embarked on a multi-trillion-dollar quantitative easing program, reducing minimum bank reserves from 26% to 2020% on March 10, 0, putting us in the current battle with inflation that is pushing people to look for alternative ways. to preserve wealth. Bitcoin has become an important option,” wrote Stadelmann.
“Bitcoin will not see any resistance up to the $30.000 level for now. “If a systemically important bank like Credit Suisse collapses, it could plunge the market to as low as $9.000-13.000.”
“When the markets crashed in 2020, Bitcoin was among the first commodities to recover. “Bitcoin is still quite far from its all-time highs and could quickly double back to its former highs, especially if the Fed reverses course and starts another quantitative easing program,” Stadelmann said.
Mayank Shekhar, co-founder and chief technology officer of play-to-win, Tek World Nation, expects Bitcoin to be increasingly perceived as a store of value and expected to trade between $21-22 by the Fed meeting on interest rates on March 24.000 and 27.000 next week. told.
Aziz Kenjaev, head of partnerships at decentralized crypto exchange, GammaX Exchange, expects the crypto market to cool before the Fed rate decision.
“The Fed is expected to raise rates by 25 basis points, any figure above this forecast will act as a strong bearish sentiment for the US dollar and a strong bullish sentiment for Bitcoin. In this context, I expect Bitcoin to reach $28.100 next week.”