Crypto market cap retakes $1T, and derivatives point to further upside
The total crypto market capitalization increased by 26% in seven days, reaching $1.16 trillion on March 17. Bitcoin (BTC) was the biggest gainer among the top 20 coins, up 31.5%, although some altcoins gained 50% or more during that period.
The rise in cryptocurrency prices occurred when the US central bank was forced to lend the banks $300 billion in emergency funds. According to the PBS News Hour, nearly half of the money went to failed financial institutions Silicon Valley Bank and Signature Bank and was used to pay uninsured depositors. The remaining $153 billion was obtained through a long-running program known as the “discount window,” which allows banks to lend funds for up to 90 days.
Although it appears to protect the banking sector, supplemental funding to the Federal Deposit Insurance Corporation (FDIC) and credit facilitation using Fed resources ultimately creates a “false sense of confidence,” according to activist billionaire investor Bill Ackman.
The $30 billion plan developed by U.S. regulators to avoid a major liquidity crisis at First Republic Bank (FRB) “raised more questions than it answers,” said Ackman, who manages hedge fund Pershing Square. Furthermore, Ackman stated that “half measures do not work when there is a crisis of confidence.”
Warren Buffett, the billionaire, is on the losing end of the bet
As the banking crisis worsened, Warren Buffett, the largest shareholder and co-founder of Berkshire Hathaway ( BRKB ), a $650 billion financial conglomerate, saw his holdings rapidly deteriorate. Berkshire Hathaway, for example, is the largest holder of Bank of America ( BAC ) stock, which has fallen 15.5% so far this year. This position alone has cost Buffett’s investment vehicle $5.2 billion.
Buffett, a noted cryptocurrency critic, has stated that he has no interest in Bitcoin, even though the entire float is offered at $1,300. The 91-year-old, with a net worth of around $102 billion, claimed that Bitcoin produces nothing, while farmland and residential real estate do.
However, Bitcoin’s price rose 31.5% in the six months to March 17, while Berkshire’s shares rose 5.8%. So for now, the so-called “rat poison,” as Buffett once described Bitcoin, is surpassing his own financial management firm.
Support for the $1 trillion market cap was quickly restored
Let’s look at the performance of the top 80 cryptocurrencies by market cap to see if the rise above $1 trillion has boosted the confidence of altcoin investors.
Conflux Network (CFX) gained 97.6% after KuCoin Ventures announced a $10 million investment in stablecoin issuer and blockchain-based payment service provider CNHC, which is available on the Ethereum and Conflux networks.
Stacks (STX) surged 75.7% as the network is scheduled to undergo an upgrade on March 20, introducing Stacks 2.1 with new features and improvements.
Immutable X (IMX) rose 71.7% after a long-awaited cooperation announcement scheduled for March 20.
Options traders are extremely confident about market conditions
Traders can gauge market sentiment by gauging whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, while put options are for bearish strategies.
A put-to-call ratio of 0.70 indicates that open interest for put options lags behind the multiple call options. Conversely, a 1.40 indicator favors put options, which is a bearish sign.
Related: Crypto Biz — SVB Collapses, USDC Depegs, Bitcoin Still Up
Since March 12, demand for neutral-to-bullish call options has increased, indicating the increasing risk appetite of derivatives traders. The move peaked on March 17, when the volume of call options exceeded the volume of protective put options by a ratio of three to one.
The gap favoring call options has stabilized at two-to-one, indicating that professional investors are unconcerned after rejecting the $1.16 trillion market cap level on March 17. Ultimately, data indicates strong conviction for Bitcoin’s $26,000 support, so bulls are in a stronger position to continue their rally.
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