Bitcoin (BTC) had every right to a miserable weekend.
In a week that crypto-adjacent bank Silvergate Bank finally collapsed after months of speculation, followed by another collapse in the form of Silicon Valley Bank.
Concerns grew when USD Coin (USDC), the second-largest stablecoin and fifth-largest cryptocurrency overall, was depegged from the dollar after developer Circle disclosed exposure to SVB.
Since all good things come in threes, another crypto-friendly financial institution, this time Signature Bank, filed for bankruptcy on Sunday.
With the strong smell of Terra-USD-style contagion hanging in the air, crypto investors had every right to exit their positions before things got tough.
Here we go again, viewers. Well, it didn’t quite end that way.
Bitcoin initially looked irritated, especially after falling close to the 20,000 mark on Thursday and finally plunging below the barrier on Friday.
But BTC/USDT reversed course fairly quickly, edging back above 20,000 on Saturday and up 7.5% to $22,000 on Sunday.
This morning we see another bullish bitcoin action, with the BTC/USDT pair running up to $22,300.
Bitcoin Crisis? What crisis? – Source: currency.com
More importantly, the USDC almost reverted to its dollar peg, staving off a large-scale crisis for now.
Perhaps, as Hargreaves Lansdown equity analyst Sophie Lund-Yates told Bloomberg, it was “a bit of a storm in a teacup.”
Of course, there are valuation concerns in the stock market that could rub off on risky assets like Bitcoin.
Moreover, as Lund-Yates said, another 50 basis point rate hike by the US Federal Reserve this month is far from a given, especially given persistently hot jobs data.
In theory, these facts should all act as crypto headwinds, but the market doesn’t seem to have gotten the memo.
U.S. regulators may actually have saved crypto’s skin this time around, as the Federal Reserve, U.S. Treasury Department, and FDIC have joined forces to ensure uninsured depositors (which made up around 95%) of SVB are made complete.
That means the tech and venture funds in SVB’s client base should neither lose their deposits nor exit other uninsured positions.
Mark Connors, head of research at crypto asset manager 3iQ, called the move “at first glance risk-asset friendly.”
So regulators actually bailed out crypto last week? Quite a plot twist.
Ethereum (ETH) similarly tumbled and rallied on the ETH/USDT pair, falling as low as $1,370 on Friday before bouncing back to $1,600 on Monday morning.
ETH has actually had a better week than Bitcoin, gaining 2% over the past seven days compared to Bitcoin’s half a percent tumble.
DeFi tokens are heating up
Is it a coincidence that some of the top performers among the top 100 projects are decentralized finance (DeFi) projects?
Decentralized derivatives exchange Synthetix (SNX) gained 30% overnight, while Maker (MKR) and Lido (LDO), the two largest DeFi projects, added 27% and 18%, respectively.
The total value locked across all DeFi protocols surged over 7% overnight to $45.7 billion.
Perhaps, given the ongoing centralized banking crisis, people are turning to alternative forms of wealth management.
As long as they are aware that the DeFi space is anything but a risk-free alternative.
The global cryptocurrency market cap currently stands at 1.02 TB after rising 7% overnight.
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