Why is the crypto market up today? BTC Rises Above $27k – Cryptopolitan
Silicon Valley Bank (SVB) failed on March 10, and the bitcoin (BTC) price has been on a tear ever since. According to CoinMarketCap, the current Bitcoin price is $27,452.41. Its daily trading volume is $47,215,804,393. Bitcoin has risen 4.89% in the last 24 hours, with a current market cap of $530,402,426,836.
BTC kickstarts the bull run
BTC was trading around $19,600 in the early hours of March 10. After that, it hovered just above and below $20,000 until around 12 ET, when SVB was placed in FDIC receivership. At that point, bitcoin had lost $200, falling below $20,000, before reversing and spending the rest of the weekend trading above $20,000.
It traded for $22,386 on Monday, March 13 at 9:30 a.m. ET. Then the good times began. Just 24 hours later, BTC was trading at $26,175, briefly approaching $26,500. It was around $27,452 at the time of publication. And so the games begin.
The rise of BTC in the face of a growing US banking crisis is similar to how it reacted during the banking collapses of Cyprus and Greece. During the Cyprus financial crisis in 2013, the price of BTC increased by up to 5,000% due to Cypriot banks’ exposure to overburdened regional real estate companies.
When Greece faced a similar crisis in 2015 and imposed capital controls on its citizens to prevent a bank run, the price of BTC increased by 150%. So the current market decline comes as no surprise to seasoned investors. According to Federal Reserve Chairman Jerome Powell, “people’s expectations about inflation have a real effect on inflation.”
The US banking system will lose $100 billion by 2023
According to data compiled by CompaniesMarketCap.com, the six largest US banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs – have lost nearly $100 billion in market value since the beginning of the year.
Bank values in the USA have fallen as a result of the ongoing regional banking collapse in the country. This includes the closure of Silvergate, a crypto-friendly bank, last week, followed by regulators’ subsequent takeovers of Signature Bank and Silicon Valley Bank.
The crisis was compounded by the near-collapse of First Republic Bank, which was saved at the last minute by a combined $30 billion infusion from Wells Fargo, JPMorgan Chase, Bank of America and Citigroup, among others.
What has caused the crypto market to rise?
1. Bank error
Given BTC’s history, the proximity to bank failure is obvious: At least three banks have failed, and more banks, both US and foreign, are failing. But because it is not due to Bitcoin, this is positive for the price of bitcoin.
Actually, it is unclear who is to blame for the three bank failures, since it is unknown whether these banks are insolvent. But, certainly, SVB failed as a result of an old-fashioned bank run compounded by apparent balance sheet weaknesses resulting from poor duration risk management.
And, yes, Silvergate ran into difficulties and required an FHLB loan, but the eventual shutdown was reportedly voluntary. And then there’s Signature Bank, where even regulators can’t decide whether the bank was shut down because of crypto or a “crisis of confidence” in management.
These banks are not in trouble as a result of betting on bitcoin, cryptocurrency or companies in these industries. Instead, the fractional reserve banking system appears to be under stress from rising interest rates, and the cracks are showing. When banks fail, the narrative goes, opt out and buy bitcoin. That narrative is compelling enough to drive up the price.
2. The instability of stablecoins
Following the failure of Signature Bank, the USD coin (USDC) lost its dollar peg last weekend. The USDC regained the link during the week, but the loss of the link alarmed many people. To the USDC’s credit, it’s worth noting how quickly it bounced back to $1. However, the depreciation showed that the USDC is not immune to counterparty risk, as some may have mistakenly assumed.
A related stablecoin story took place in the early hours of March 13 when Binance, the world’s largest crypto exchange by trading volume, converted $1 billion of stablecoin Binance USD (BUSD) in US dollars into bitcoin, ether and other cryptocurrencies. The conversion was the consequence of Binance competitor Coinbase officially shutting down BUSD trading on its platform due to “liquidity concerns”.
Binance’s sale not only increased the buying pressure, but it could also have resulted in a “follow the leader” effect where people exchanged their BUSD for bitcoin.
Hayes ditches stocks for crypto
Meanwhile, in his latest market blog post, Arthur Hayes, former CEO of derivatives giant BitMEX, revealed his own pivot. Unlike stocks, Hayes concluded that Bitcoin was a firm safe haven after an in-depth examination of current Fed behavior and its potential consequences.
For me and my portfolio, I’m pretty much done trading stonks. What is the point? I usually buy and hold and don’t trade around my positions very often. If I believe what I wrote, then I’m signing up for underachievement […] If there’s a short-term trading opportunity where I think I can make some quick fiat buckets and then take my profits and buy more Bitcoin, I’ll do it. Otherwise, I liquidate most of my stock portfolio and move it to crypto.