Bitcoin’s return to January days
Bitcoin returned to January levels on Thursday and plunged below $20,000.
The largest cryptocurrency by market cap recently traded at $20,067, down 7.7% over the past 24 hours, as nervous investors over persistent inflationary pressures, the fallout from the implosion of crypto-friendly Silvergate Bank and most recently a lawsuit from the state New York angered by claims that ether and other cryptos are securities. BTC has now given back about half of its gains from the buoyant first six weeks of the year, as hopeful investors sent the cryptocurrency up about 40% and over $25,000 in mid-February.
“There are a lot of people who are afraid that the domino effect might just be starting,” said Eddy Gifford, wealth manager at investment advisor Tactive. “There’s FTX, now Silvergate, who’s next? We also had news from the Fed where (Fed Chair Jerome) Powell has been very hawkish, probably raising interest rates higher than anyone even wanted to expect – and possibly keeping those interest rates higher for longer. In such situations, risky assets generally tend to decline as valuations are a function of the ability to meet estimates and the interest rate environment.”
He added: “So if the interest rate environment stays high for longer, it will push prices down.”
Ether has roughly paralleled Bitcoin’s plunge, changing hands at around $1,430, its lowest since mid-January. Other major cryptocurrencies were firmly lower with CRO, the token of exchange Crypto.com down 7.6% and popular meme coins DOGE and SHIB both down more than 8%. The CoinDesk Market Index, a measure of the performance of the broader crypto market, was down 7.5%.
The bad mood in the crypto markets also manifested itself in crypto trader liquidations of around $307 million over the past 24 hours, according to Coinglass data. Bitcoin (BTC) traders suffered the heaviest losses, around $112 million, while Ether (ETH) liquidations topped $73 million. Of the trades that were liquidated, about $282 million were long positions betting on higher prices.
Meanwhile, stock markets tumbled amid a massive sell-off in banking stocks that sent JPMorgan Chase and Bank of America down more than 5% and 6%, respectively. The tech-heavy Nasdaq tumbled 2.1%, while the S&P 500 and the Dow Jones Industrial Average (DJIA) fell 1.8% and 1.7%, respectively. The slowdown came even as jobless claims edged up, a mildly encouraging sign given the tight labor market that has pushed prices higher.
Tactive’s Gifford said that if Bitcoin breaks $20,000, “we could get to $15,000 pretty quickly,” and if we break $15,000, we’ll go to $10,000 quickly. But he noted Bitcoin’s staying power and next year’s halving. “That was usually a spark for bull markets in bitcoin,” he said.
He added: “We will see a few more companies fall but that will only make those left at the back end much stronger. And I think that speaks to the fact that we’re actually seeing broader adoption of digital assets in general.”
Futures contract holders remain unbowed
The average funding rate for perpetual futures contracts on both Bitcoin and Ether remains positive despite recent concerns about turmoil in the markets. Financing rates are set by exchanges and regulate the price of futures contracts in relation to the market value of the asset.
Positive funding rates indicate bullish sentiment as long position holders pay short positions. The opposite is true when funding rates are negative.
Funding rates for BTC have been positive since February 13th, except for a negative dip on March 5th.
Crypto-friendly Silvergate Bank will “voluntarily liquidate” its assets and cease operations, its holding company Silvergate Capital Corp said. on Wednesday with Jim Bianco, President and Macro Strategist of Bianco Research, LLC, and Octavio Marenzi, CEO and Founder of Opimas, LLC commented on the latest developments. Also, Bennett Tomlin, co-host of Crypto Critics’ Corner, discussed the Wall Street Journal’s recent report that the company behind the world’s largest stablecoin accessed bank accounts through forged documents and intermediaries.