CoinLoan Weekly: BTC's gains, thriving in chaos, EU's allure for crypto firms
Bitcoin made spectacular gains. Rising from roughly $21,300, it approached $25,940 on Tuesday, March 14, lingered below $25,000 for a while, and shot up on Friday, March 17. After touching $27,800 the next day, BTC dipped on Sunday, March 19, and resumed growing, eventually breaching the $28,000 level. On Monday, March 20, it topped out at $28,500.16 and returned to $28,000 in the late hours.
On Saturday, March 18, the Crypto Fear and Greed Index switched back to greed, with a 13-point increase over 24 hours. This rise came amid fears of new cracks in the US and EU economic landscape. Following the liquidation of Silvergate Bank and the shutdown of Signature Bank, the US government guaranteed a backstop for local institutions. However, traders still drove the shares of other regional banks down.
Meanwhile, Bitcoin "has shown its superior risk and inflation resistance as an alternative asset, and will be further recognized by the mainstream," according to James Wo, founder and CEO of DFG. He summed up the sentiment, saying, "The market's confidence in traditional finance was dented, leading to a shift of funds to the crypto market."
At press time, BTC is trading at $27,907.93, with a 24-hour shift of +0.1% and a 7-day rise of +15.3%.
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Ether also rose through the week. From around $1,550, it reached $1,773.87 on Tuesday, March 14, dipped below $1,600, and soared above $1,750 on Friday, March 17. After peaking at $1,836.54 on Saturday, March 18, ETH traded below $1,800 and concluded the weekend with a slight jump. It then descended again on Monday, March 20, returning to just under $1,800 and eventually touching $1,770.
Last week, technical analysts noted firm support at $1,600, a potential foundation for further gains. Moreover, the Shanghai upgrade, slated for April 13, is expected to boost the ETH price by "effectively de-risking staking for retail and institutional investors." By enabling withdrawals of ETH staked since 2020, it will conclude the network's transition to Proof of Stake.
ETH’s drop on Saturday, March 18, coincided with a sizable whale transfer — one unknown wallet sent ETH worth $33 million to Binance. As a potential sign of diminishing sentiment, this move raised fears of a massive sell-off. Whales may dump a specific asset in large amounts when they doubt its potential or believe its price has peaked.
At the time of writing, ETH is worth $1,753.21, with a 24-hour slip of -1% and a 7-day increase of +4.4%.
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Like Ether, the Ripple token made gains that were dwarfed by Bitcoin. From around $0.365, it rose to $0.385 on Tuesday, March 14, dipped to nearly $0.360 the next day and jumped to $0.380 on Friday, March 17. During the weekend, the price approached $0.387 before sliding below $0.380 again. It then reached $0.398524 and headed down. On Monday, March 20, XRP fell to $0.377.
Despite the recent market rally, XRP whales have entered a selling frenzy, offloading almost 30 billion tokens in the past week. According to Beincrypto analysts, since the FTX fiasco, crypto investors have often sold shortly before price drops. However, this sell-off is not the only negative signal.
The developer activity on the network has also declined. A fall of over 60% since mid-February translates into fewer resources and less attention directed toward enhancing the XRP Ledger. That said, positive expectations around the SEC vs. Ripple case support a positive long-term picture.
As of this writing, XRP is trading at $0.387828, with a 24-hour uptick of +1.2% and a 7-day gain of +3.9%.
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BTC surges as central banks prepare to stem bank risk
Following another week of banking turmoil, Bitcoin rocketed above $28,000 early on Monday, March 20. The majority of the non-stablecoin top 10 followed suit. This rally came after several central banks launched a joint effort to support market liquidity through cash influxes. Another consequential event was UBS's emergency acquisition of Credit Suisse.
Bitcoin broke the $28,000 ceiling for the first time since mid-June 2022. The leading cryptocurrency is now over 66% up year-to-date. Meanwhile, the total crypto market capitalization rose 2.1% in the past 24 hours to $1.22 trillion, per CoinGecko.
Central banks join forces to mitigate crisis
On Sunday, March 19, the Federal Reserve announced a coordinated move to pump more US dollars into markets through "the standing US dollar liquidity swap line arrangements." This action involves the central banks of Canada, the UK, the EU, Switzerland, and Japan. These institutions will "increase the frequency of 7-day maturity operations from weekly to daily."
US equities reacted to the news by edging higher after Friday drops. By 9 AM Hong Kong time, the Dow Jones Industrial Average and the S&P 500 futures had gained modest ground, along with a 0.41% increase for the Nasdaq Composite Index.
However, the First Republic Bank stock is still down despite a $30 billion injection to cover uninsured deposits. S&P Global has downgraded the bank's status to junk, explaining that the infusion may only ease short-term liquidity pressures. At the time of this writing, the shares are trading at roughly $12, with a devastating loss of 82.13% over the past month and 47.11% over the past 24 hours.
Inflation: New hikes ahead?
The University of Michigan has reported a decline in the US consumer sentiment index in March. This first dip in four months suggests the Fed's unrelenting hikes of the past year have finally caused some cooling. However, most of the interviews for that preliminary release had been completed before Silicon Valley Bank’s failure.
Furthermore, CNBC's Jeff Cox notes that the slowdown in inflation has been linked to an energy price decline. According to the Labor Department, the Consumer Price Index gained 0.4% in February, a 6% 12-month increase. As a result, the latest report bolsters expectations of another rate hike.
The current benchmark rate range — from 4.5% to 4.75% — is the highest since October 2007. The next FOMC (Federal Reserve Open Market Committee) meeting is scheduled to begin today. At press time, the CME FedWatch Tool shows 80.1% probability of a 25-basis-point hike against 15.9% for no change.
US banking crisis highlights opportunities for crypto in Europe
The banking crisis has taken a toll on crypto-friendly banks in the US, but European businesses may capitalize on the fallout. As a result, Europe, which has often lagged behind in crypto volumes and adoption, may finally forge ahead.
If American bankers wait too long to welcome crypto firms again, businesses may start looking elsewhere. Conor Ryder, a research analyst at Kaiko, suggests that the longer it takes the banks to take in "some of the millions of dollars once parked at Silvergate," the more likely this exodus scenario.
The US crypto market is plagued by regulatory vagueness, with obstacles to dollar on-ramps. Constantly changing headwinds force businesses to stay vigilant. In stark contrast, Europe is implementing the first comprehensive framework — MiCA (the Markets in Crypto-Assets Act). It offers more regulatory clarity and more convenient fiat payment rails.
Fading appeal of US dollar
According to Ryder, fiat currencies — specifically, the US dollar — are becoming less attractive for investors. Stablecoins have already eclipsed fiat on exchanges, constituting over 90% of volumes in the last year alone.
Still, while the banking cut-off may not directly affect crypto investors, it is bound to create problems for trading platforms. For instance, they may only be able to serve customers during official US trading hours.
Meanwhile, the BTC-EUR volumes spiked In the aftermath of the Silvergate collapse. Ryder notes that the pair's advantage over USD hit an all-time high last week — 21% of BTC volumes compared to 7% in November.
CoinDesk's George Kaloudis is a strong believer in the power of market narratives, and he is not alone. Even Fed Chair Jerome Powell once said that “people's expectations of inflation have a real effect on inflation.”
As Kaloudis notes, it was not crypto that caused three US banks — Silvergate, SVB, and Signature — to collapse. What spelled their demise was the pressure from persistently hawkish interest rates, the Fed’s policy of the past year. Thus, the current narrative may support Bitcoin's image as a viable alternative to TradFi.
Summing up the macro backdrop, Andrew Kang tweeted that it has "never been more perfect" for BTC. Among the reasons, Mechanism Capital co-founder cited a "mediocre" yield on bonds, the fading appeal of equities, and the upcoming moderation of the Fed's hikes due to "economy slowing & global financial system turmoil."
Finally, Signature Bank's failure caused major stablecoins to depeg, albeit temporarily. Despite USDC's rapid recovery, the dip highlighted counterparty risks for the stablecoin, a feature it shares with the US dollar. Kaloudis sees those concerns as another factor supporting Bitcoin's appeal.