Mar 17, 2023

Bitcoin (BTC) has cleared a major resistance during Friday's Asian trading hours, climbing back up to $26,600 despite contagion jitters surrounding the banking industry.

Video transcript

Take a look at your charts. Bitcoin is heading up and that's it's having cleared a major resistance level during Friday's Asia's trading session. Joining us now to discuss the crypto markets is coin based institutional head of research, David Wang, welcome David. So David, you know, we we're seeing prices a lot higher today than one would expect during a financial crisis except maybe the Bitcoin maximalist will say, of course, this is what would happen nonetheless, what is actually going on in terms of this market sentiment that would lead to Bitcoin to go up to this these kind of prices? Is it um is it money leaving sta stable coins, for instance, are people selling stable coins for Bitcoin? Is that what we're seeing here or is there a genuine uh uh bullishness? Does this market have legs right now? I think the flight to quality is some part of this and this is why we're seeing Bitcoin dominance uh at the 45% level. For example, you know, I think crypto markets are firmer because many people are taking solace that there was a rescue package available for First Republic Bank. Um Many people shrugging off the idea of a 50 basis point rate hike by the ECB today. But I think uh above all, probably on the macro front, a lot of people believe that a fed pause or even rate cuts uh which are now being priced into the second half of 2023 are very possible. So maybe traders are positioning for a return of some easy money policies, uh which, you know, frankly, they were what propelled the last crypto bull market. So, so you're looking at it as more of a risk on uh world ironically, uh because of the rate cuts and, and that's leading to ab bullishness. Does that, does that hold for institutions as it does for retail or where, where is the driving factor here? Where is it coming from? Is it from the retailer or from institutional? That part is really hard to say. I mean, we are operating in fairly low liquidity conditions at the moment considering everything that's happened over the last week. Um At the moment, I would say a lot of institutional investors are still sidelined, trying to figure out what the direction is going to be. Uh Now, that's not to say that optimistically, like many people aren't cautiously kind of bullish about what's going on at the moment because you know, whether you know all the stories they've kind of touched upon this morning in terms of whether the industry wants us to be banked or not a lot of that demand isn't going anywhere. And that is really important in terms of the reinforcement of the idea that there are fundamental arguments in favor of digital assets and they present an alternative and solution to the points of failure that we're witnessing right now in the existing financial system. So I think many people have been bolstered by that and that's also contributing to the medium long term positive view here. But are are, are they actually thinking about it at this present moment? I mean, like this is in many ways, you know, we're seeing these failures of of 22 major crypto bank, er at least in the United States when it comes to crypto signature and, and, and Silver gate and a a and a startup friendly tech friendly uh Silicon Valley Bank. It all of these seem to have a a crypto underlying theme that that crypto at least the the perception is crypto caused the problem in some way. Uh And, and that, that led to some sort of chaos at these banks. I'm not saying it is or isn't this is just the the perception that this is what happened? So how does that reconcile with the idea that? Oh, ok. Um you know, this is a crisis in the financial system. Let's run to Bitcoin when it's like, oh, well, crypto is it may have caused this. So two things there, I mean, first when you say perspective you have to count straight on. Well, whose perspective is that? Because from many people, and I'm not just talking about crypto investors. By the way, I'm talking about a lot of people in the investment community because I'm still very connected to the trad community from which I I came from, you know, we really recognize that regulators were the ones who didn't get the banks that failed last week to acknowledge what should make a lot a sense in terms of customers, like, like the the customers that these banks hold shouldn't just all come from one industry. For example, if you're gonna have customers like few customers with a narrow focus, clearly, you put yourself at a more vulnerable composition. So they didn't get Silicon Valley Bank to expand beyond the tech sector. And when that sector faced problems due to rising rates because of the central bank and its tightening path. Well, yes, so did the bank. It, it was clear that that should have been a vulnerability and they didn't address that. So, you know, I think right now as far as what you're saying about the crypto space, you know, crypto natives do see that. In fact, they might actually just be repeating some of the same mistakes by actively trying to force crypto crypto uh companies to just bank in a few places. And I think you kind of pointed out that Brian Brooks actually uh was, was saying this as well that the demand is there, you're not gonna be able to stem it. So if this is kind of the path that they're gonna take, I don't think they're gonna be successful. David looking at next week, what's your outlook in terms of what support and resistance lines are you watching for Bitcoin? And what are you anticipating out of the Fed? So hopefully, we're famously agnostic to price action at the point at this point that people would realize that. But I will say that short term, it is a little more challenging because of the fed. Certainly. And I think there are three real paths for the FED at the moment. You know, we're seeing that effectively, the fed can either pause rates next week, which, you know, I, I think like the distribution of outcomes is fairly wide at this point, they could hike 25 pips then pause or they can just continue on the path. I tend to think that the last path is the most likely and that creates a lot of uncertainty in this market at the moment because if they do that, basically, they're acknowledging that, you know, they had quote unquote solved the problem. Of course, they're trying to maintain credibility, right? Because inflation still is very, very high, they are trying to show that they are fighting this and they, they haven't given up on that quite yet. Um And I don't think the terminal rate, by the way is as high as 6% anymore. It's probably down to five and a four or 5.5. But the risk that to the market is that they're saying that there are no risks here and that's not true. I think that they're still kind of living risks, even if they're unanticipated and that the fed needs to kind of respond to that. So we'll see how that kind of enforces, uh, the price action. I do think though that the floor for many of these uh especially large cap names is much higher now than it was before. All right, David, thank you so much for your insights. I was coin based institutional head of research and David Du.

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