Bitcoin, the world’s largest cryptocurrency by market capitalization, rose 36.06% for the week of March 10 to March 17 to $26,795 in Hong Kong at 7:00 pm on Friday. Ether rose by 26.67% to $1,750 over the same period.
However, equity markets had a torrid (understatement) week on fears of cracks in the US banking system.
It began a week ago when Silvergate Bank went into voluntary liquidation after its shares fell following a bank run. 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 bank failure.
It was serious enough that US Treasury Secretary Janet Yellen contacted the White House over the weekend of March 11 to seek approval from President Joe Biden to begin the administration. The Treasury then issued a joint statement with heavyweights the Federal Reserve and the Federal Deposit Insurance Corporation, assuring them they would bail out US banks.
Biden repeated the same message during the week, as traders lowered shares of other US regional banks. Attention shifted to Europe as global investment bank Credit Suisse began to falter following a $54 billion bailout by the Swiss National Bank. On the US side, 11 financial institutions were forced to take action to inject $30 billion after First Republic Bank’s stock price fell.
Wrong focus?
Despite the lingering difficulties in the banking sector, Bitcoin remained resilient and only briefly fell to $19,654 on March 10 before returning to the $20,000 level the following day and then rallying for the week.
“While the US banking system seized in response to bank operations that threatened regional banks, Bitcoin, Ethereum and other crypto networks were not spared.” on Twitter Cathy Wood, founder and chief executive of investment management giant Ark Invest.
Amid recent regulatory pressure on crypto platforms, Wood couldn’t seem to resist driving home this point;
“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 expected in traditional banking.”
Slowed down
James Vo, founder and CEO of crypto investment firm DFG, shares Wood’s sentiment.
“The market’s confidence in traditional finance has been undermined, leading to a migration of funds to the crypto market,” Vaughn wrote in a LinkedIn response. Bitcoin has “demonstrated its high risk and inflation resistance as an alternative asset and will continue to be recognized by the mainstream,” he said.
Bitcoin then bounced back above the $26,000 mark on Tuesday following the release of the US Consumer Price Index (CPI), which showed the annual inflation rate falling to 6% in February.
However, Jamie Douglas Coutts, senior market structure analyst at Bloomberg Intelligence, says the bitcoin rally is really driven by the US banking earthquake, not the CPI reading.
“Bitcoin has been heavily bid since last Friday when it became clear that the US banking system was in trouble. The real story is the 25 percent rally since then. The CPI print increase to $26,000 is noise because the number was in line with expectations and it quickly fell below $25,000, a level that I believe is extremely important from a technical perspective,” Coutts wrote. Forecast:
Hedging
Slava Demchuk, co-founder of AMLBot, an anti-money laundering software, attributed bitcoin’s rise to investor hedging.
“[Bitcoin’s rally] This is not necessarily due to widespread recognition of the non-custodial potential of digital assets such as Bitcoin or Ethereum, but as a means of protection from traditional financial systems,” Demchuk wrote.
Bonnie Chew, chief strategy officer at Sending Labs, a software company that builds Web3 communications protocols, said global government interventions would help bitcoin reach new heights.
“The swift move by the Swiss government to support Credit Suisse has certainly given the market an olive branch to hold on to in the coming weeks. This, along with the actions of the US government, has now set a precedent,” Cheung said.
“Governments are expected to not hesitate to step in if any major banking crisis starts to develop in the next few weeks. This will further fuel bullish sentiment and create a story to push Bitcoin to test new highs,” Cheung wrote.
The global crypto market capitalization stood at US$1.14 trillion as of 19:00 in Hong Kong on Friday, up 23% from US$923 billion a week ago, according to data from CoinMarketCap. Bitcoin’s US$520 billion market cap is 45.2% of the market, while Ether’s US$215 billion is 18.7%.
See related article. Circle’s Disparte Says Banks Bring Systemic Risks to Crypto
The biggest profit. CFX, STX are up 100%
CFX, the utility token of Conflux Network, China’s only public blockchain, was this week’s biggest gainer among the top 100 coins by market capitalization listed on CoinMarketCap. For the week, CFX gained 105.99% to $0.317.
The sign started gaining momentum after Conflux announced that KuCoin Ventures has invested US$10 million in the protocol. Conflux also introduced CNHC, the CNH stablecoin for cross-border payments.
STX, the native token of Stacks, Bitcoin’s smart contract layer, was the second biggest gainer of the week, up 100.13% to US$1.09.
The token surged after its upcoming hard fork, Stacks 2.1, was announced for March 20th. The update aims to create a stronger connection between Stacks and Bitcoin by introducing decentralized mining pools, improved bridges, and enabling compatibility between native Stacks assets. – like Ordinals – and Bitcoin wallets.
Next week. Bitcoin to $28,000.
“Right now, systemic risk is front and center on investors’ minds,” Coutts wrote. “Before this banking crisis seemed to start in the US, the situation with Deutsche and Credit Suisse in Europe has been a slow train wreck for years,” he said.
“Short-term is not my forte, but if we end up with a weekly close above $25,000, then I’ll have to adjust my model mode to bullish because that signals that we’ve completed the floor process that started in mid-2022 and the new the bull cycle. in progress,” Coutts added.
DFG’s Wo said macroeconomic trends in the US, upcoming rate hikes and global banking issues will remain key determinants of traditional and crypto markets in the coming weeks.
Kadan Stadelman, CTO of blockchain infrastructure development company Comodo, says the fragile US economic landscape is currently the main driver of bitcoin prices.
“The Federal Reserve embarked on a multi-trillion dollar quantitative easing program, reducing bank reserve requirements from 10% to 0% on March 26, 2020, and has led us to the current bout of inflation, forcing people to look for alternatives. to preserve wealth. Bitcoin has become a prominent option,” Stadelman wrote.
“Bitcoin will not see any resistance before the $30,000 level for now. If a systemically important bank like Credit Suisse collapses, it could bring the market down to $9,000-$13,000,” he said.
“In 2020, when markets crashed, Bitcoin was one of the first commodities to recover. Bitcoin is still well off its all-time highs and could quickly double back to its old highs, especially if the Fed reverses course and starts another quantitative easing program,” Stadelman said.
Mayank Shekhar, co-founder and chief technology officer at One World Nation, said bitcoin is increasingly seen as a store of value, and he expects it to reach $24,000 to $27,000 next week. March 21st and 22nd Fed meeting on interest rates.
Aziz Kenjaev, head of decentralized crypto exchange GammaX Exchange Partnership, expects the crypto market to cool down before the Fed rate decision.
“The Fed is expected to raise interest rates by 25 basis points, any number above this forecast will act as strong bearish sentiment for the USD and strong bullish sentiment for Bitcoin. In this regard, I expect Bitcoin to reach $28,100 next week.”
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