First Mover Asia: Bitcoin Dips Below $25K as Market Worries About Liquidity

ALSO: CoinDesk's Shaurya Malwa writes that higher-than-usual market volatility affected bulls and bears alike as crypto futures racked up $300 million in liquidations over a 24-hour period earlier this week.

AccessTimeIconMar 16, 2023 at 2:18 a.m. UTC
Updated Mar 16, 2023 at 2:35 p.m. UTC
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Good morning. Here’s what’s happening:

Prices: Bitcoin and ether are coming off a multi-day rally, slipping into the red.

Insights: Bitcoin and ether volatility stunned bears and bulls alike over a 24-hour period earlier this week. Was the price movement the result of the bank crisis?

Prices

Bitcoin Dips Below $25K as Market Debates Liquidity

1,089
−28.3 2.5%
$24,330
−621.2 2.5%
$1,649
−63.7 3.7%
S&P 500
3,891.93
−27.4 0.7%
Gold
$1,919
+12.6 0.7%
Nikkei 225
27,229.48
+7.4 0.0%
BTC/ETH prices per CoinDesk Indices, as of 7 a.m. ET (11 a.m. UTC)

Bitcoin and ether began the Asia trading day in the red, with bitcoin declining 2.5% to $24,330 and ether declining 3.7% to $1,649.

Liquidity is on everyone’s mind, especially in the face of record drawdowns from the Treasury General Account during the COVID-19 era, and more after the failure of Silicon Valley Bank.

Most recently, something appears to have spooked the Federal Deposit Insurance Corp. as it replaced $40 billion in funds it took from the TGA, initially earmarked to help ease market disruptions from the closure of SVB.

As Reuters recently reported, over the past week the TGA was down nearly $100 billion before the FDIC returned its $40 billion.

“The TGA was drawn down all during 2023, and that helped markets in general including bitcoin. But as of late in the last five days, the TGA had nothing to do with bitcoin's outperformance,” Mark Connors, head of research at 3iQ, told CoinDesk in a note. “There's a little more confidence that the bitcoin thesis is not just intact, but it's been validated at a level that we've never seen before.”

Connors says this is a question of confidence for the Federal Reserve.

“When you see the Fed creating a bubble, popping the bubble and then not knowing which game to play by inflation, or stabilize financial markets, it does not instill confidence,” he continued.

A bigger question at hand is rate volatility, according to Connors, and the market hates uncertainty.

“The reason that's important is because rates are used to price every asset on the planet,” he said. “And when you have uncertainty on interest rates, you have uncertainty on what everything is worth.”

The next meeting of the Fed's rate-setting Federal Open Market Committee is scheduled to take place March 21-22.

Asset Ticker Returns DACS Sector
Gala GALA −13.7% Entertainment
Avalanche AVAX −10.6% Smart Contract Platform
Loopring LRC −10.3% Smart Contract Platform

Insights

Bitcoin, Ether Volatility Stuns Bears and Bulls Alike

By: Shaurya Malwa

Higher-than-usual market volatility affected bulls and bears alike as crypto futures racked up $300 million in liquidations over a 24-hour period on Wednesday.

Liquidation refers to when an exchange forcefully closes a trader's leveraged position due to a partial or total loss of the trader's initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).

Large liquidations can signal the local top or bottom of a steep price move, which may allow traders to position themselves accordingly.

Bitcoin and ether briefly inched above $26,000 and $1,770 respectively on Tuesday as investors brushed off the long-term effects of a regulatory clampdown on crypto-friendly banks and U.S. consumer price index (CPI) data pointed to slowing inflation in the coming months.

Bitcoin's weekly chart shows the cryptocurrency is again struggling to establish a foothold above $25,000, which capped gains last month and in August 2022. According to chartered market technician Aksel Kibar, a breakout above $25,000 would shift focus to the next hurdle at $28,600. "All About Bitcoin" host Christine Lee breaks down the "Chart of the Day."

But the euphoria was short-lived as both major tokens dipped as much as 5% from Tuesday's highs before gradually stabilizing. In Asian morning hours on Wednesday, bitcoin traded just under $25,000 while ether traded slightly over $1,700.

The volatility caused over $140 million in bitcoin futures and $80 million in ether futures to take on losses. Of this, 58% of futures losses came from shorts, or bets against price rises, while the remaining came from longs, or bets on price rises – meaning both short sellers and long traders were hit almost equally.

Among other major tokens, futures on Conflux's CFX tokens and Filecoin's FIL had $8 million and $5 million in liquidations, respectively, as trading volumes for both surged on fundamental developments.

Meanwhile, some market observers said the price action came as investors looked for alternative assets following last week's collapse of Silicon Valley Bank.

"Bitcoin's rally to a new yearly high as Silicon Valley Bank falls and inflation remains stubborn shows that investors are looking to bitcoin for stability in highly uncertain market conditions," Alex Adelman, co-founder of bitcoin rewards app Lolli, told CoinDesk.

"While many have looked to bitcoin as a hedge against inflation and tracked its price moves accordingly, bitcoin's relationship to traditional finance is more complex," Adelman stated, adding that bitcoin worked as an "alternative to the traditional financial system at large."

"Weakness across the banking sector has heightened investor awareness of bitcoin's unique value proposition. In the coming weeks, we will continue to see increased demand for bitcoin as a superior system for holding and moving money securely," Adelman said.

Important events

8:30 a.m. HKT/SGT(00:30 UTC) Australia Unemployment Rate s.a.(Feb)

12:30 p.m. H1HKT /SGT(4:30 UTC) Japan Industrial Production (YoY/Jan)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

The bitcoin (BTC) dominance rate has climbed amid increasing turbulence in crypto markets, according to TradingView data. This came as the Federal Home Loan Bank of San Francisco says it didn't force Silvergate to repay advances, which was rumored to be the reason why crypto-focused Silvergate decided to shut down. Lyn Alden Investment Strategy founder Lyn Alden and Dunleavy Investment Research crypto strategist Tom Dunleavy joined “First Mover.”


Headlines

U.S. Federal Reserve’s Real-Time Payments System Coming in July: The new government-operated payments system – often used as an argument against the need for crypto’s payments innovations – will have its first participants certified within weeks.

Payments Processor Stripe Secures $6.5B in Funding at $50B Valuation: Stripe's valuation has fallen about 47% from its 2021 fund raise of $95 billion.

Starknet DAO Heads Toward First Governance Vote: The vote, opening on March 21, will let members approve a new upgrade for the scaling system’s mainnet.

Chinese Businessman With Ties to Steve Bannon Arrested, Charged With Fraud, Including $500M Crypto Scam: Guo Wengui is accused of engaging in multiple schemes that defrauded investors out of $1.4 billion.

Brian Brooks: U.S. Government Using Crisis to Choke Off Crypto Access to Banks: The former acting head of the OCC said federal regulators are working together to keep crypto assets out of the U.S. banking system.

Disclosure

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.


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