Cryptocurrency prices fell on Friday as investors grappled with a new threat to the global banking system as well as ongoing concerns over US monetary policy.
Bitcoin (BTC), the largest cryptocurrency by market cap, recently changed hands at around $27,450, down more than 2% over the past 24 hours, according to CoinDesk data. BTC surged as high as $28,300 earlier in the day and is up more than 16% in March.
But most risk-on markets faltered for most of the day after the cost of insuring financial services giant Deutsche Bank’s debt rose to a four-year high, prompting renewed concerns about the strength of the banking sector.
Deutsche Bank (DB) shares fell 14% by a point on Friday before ending 3% down. Deutsche Bank’s troubles come just days after UBS agreed to acquire its ailing rival Credit Suisse for $3.2 billion and less than three weeks after the collapse of US banks Silvergate, Silicon Valley and Signature.
In a Friday newsletter, analysts at Bitcoin mining equipment and hosting provider Blockware Solutions said that BTC’s resistance has formed at $28,800, around where it stood during a summer 2021 correction.
“This would be a logical place to see BTC put another leg down, but continued consolidation here would be welcomed,” the analysts wrote. “This is a pretty crucial point for bulls to defend in order to maintain this current bullish structure.”
“A break above this level would obviously be the most ideal scenario for bulls, but if we pull back we would like to see BTC hold ~$25,200,” they added.
Ether (ETH), the second largest cryptocurrency, recently changed hands at $1,745, down 3% from the same time on Thursday. Layer 2 Blockchain Optimism OP token price fell over 9% to $2.23 from over $2.47 the previous day.
Stock markets opened lower on Friday before closing in the green as investors recovered at least partially from their bank shock. The S&P 500, Dow Jones Industrial Average (DJIA) and the tech-heavy Nasdaq closed down 0.5%, 0.4% and 0.3%, respectively.
“Big banks are typically linked to one another, with shared exposures to syndicated loans and through a web of repo and other counterparty deals,” Steve Sosnick, chief strategist at brokerage firm Interactive Brokers, wrote in a note on Friday about bank contagion.
“It’s logical, if unhelpful, that investors burned by a bank would get serious jitters about those most like them,” Sosnick wrote.
He also noted that credit default swaps can be “disastrous” for bondholders because “they disrupt the streams of income on which the holders depend,” adding, “As a result, the market value of the bond can fall significantly and precipitously.”
Meanwhile, crypto investors weighed recent regulatory enforcement issues, including a Securities and Exchange Commission (SEC) warning to Coinbase that the agency is pursuing an enforcement action against the exchange over possible securities violations.
“Nobody knows how regulators will decide if all tokens are securities,” Edward Moya, senior market analyst at forex market maker Oanda, wrote in a note on Friday, adding that Coinbase’s success is “vital to longer-term crypto growth . ”
“In the US, Coinbase is a crucial option for how people start with crypto,” he wrote.
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