Crypto markets trapped in the Silicon Valley crosshairs

Bitcoin (BTC) is in a spot of bother right now. The benchmark crypto asset closed Thursday 6.2% lower at US$20,360 on the BTC/USDT pair, only to plummet to a two-month low of US$19,900 this morning.

For anyone keeping up with the news, the headwinds are no mystery: Once-prominent crypto bank Silvergate entered voluntary liquidation on Thursday, followed by fears of a bank run on another tech-friendly institution, Silicon Valley Bank (SVB).

Both were forced into selling vast sums of Treasury bonds for massive losses to shore up dwindling revenues.

Bitcoin, Silvergate and SVB’s fates are intermingled – all of them benefit from ultra-loose monetary policy, BTC because investors are more likely to take on risk, the banks because their primary investments, government bonds, fetch good prices.

Sounds good when money is cheap, sounds like a disaster when central banks start piling on interest rate hikes.

So it goes that bitcoin’s handsome early-2023 gains are beginning to be chipped away at. 

Week-on-week, BTC/USDT is down around 11%, but for a more optimistic analysis, we can look at year-to-date performance, which remains 20% up at the time of writing.

Losses seem to be levelling out on the one-hour chart after hitting the floor at US$19,776, though heightened volatility is all but a given in the short term.

Binance’s order book appears to be showing some buyers’ support, particularly around US$19,800, which is little help for the whopping US$123mln in long-bitcoin futures liquidations chalked up in the past 24 hours.

Bitcoin (BTC), still up year to date! – Source: currency.com

Over to Ethereum (ETH), the second-largest crypto asset took a 6.2% nosedive to US$1,440 come Thursday’s close, followed by another 2% dip to US$1,408 on the ETH/USDT pair this morning.

Long-ETH liquidations exceeded US$83mln in the past 24 hours – for the whole cryptocurrency sector, that number exceeds US$320mln.

US$1,400 appears to be the buying-in point according to the Binance order book, but any more shockwaves in the market will probably send the ETH/USDT pair hurtling lower.

Altcoins led lower

This week’s market woes are being felt just as much in the altcoin space.

That being said, Ripple (XRP) still remains the sole outlier among the large caps, in the sense that XRP is the only top-tier altcoin in the green week-on-week.

However, excitement among investors over a favourable outcome in the SEC v Ripple Labs case does little for the likes of BNB, Cardano (ADA), Dogecoin (DOGE), Polkadott (DOT) and Polygon (MATIC), all of which followed bitcoin and ether in the latest tailspin.

HT, the native token of the Huobi crypto exchange, continues to top the loser’s list, having dipped a further 20% overnight. HT suffered precipitous declines on Thursday after a high volume of leveraged liquidations sent the token into freefall mode.

Tron blockchain founder and Huobi backer Justin Sun today announced the formation of a US$100mln liquidity fund to fend off future issues.

We deeply apologize for the impact of the leveraged liquidation on the market caused by a few users, and in order to further improve the multi-currency liquidity of the @HuobiGlobal platform, we will set up a liquidity fund with an investment of 100 million US dollars.

— H.E. Justin Sun 孙宇晨 (@justinsuntron) March 10, 2023

Global crypto market capitalisation headed to a two-month low of US$927bn overnight, while total value locked in the decentralised finance (DeFi) space dipped 6% to US$44.5bn.