BTC drops below $25,000 as market debates liquidity and TGA

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

Liquidity is on everyone’s mind, especially in light of record withdrawals from the Treasury’s general account during the Covid era, and more so after the failure of Silicon Valley Bank.

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

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

“The TGA was pulled down 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 bitcoins’ 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 we’ve never seen before.”

Connors says this is a matter of confidence for the Fed.

“When you see the Fed creating a bubble, bursting the bubble, and then not knowing what game to play with inflation or stabilize the financial markets, it doesn’t inspire confidence,” he continued.

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

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

The next meeting of the Federal Open Market Committee is scheduled for 21-22. March.

Bitcoin, Ether Volatility stuns both bears and bulls

Higher-than-usual market volatility weighed on 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 occurs when a trader is unable to meet the margin requirements for a leveraged position (does not have sufficient funds to keep the trade open).

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

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

Bitcoin’s weekly chart shows the cryptocurrency once again struggling to establish a foothold above $25,000, which limited gains last month and into 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 fell as much as 5% from Tuesday’s highs before gradually stabilizing. In Asian morning hours on Wednesday, bitcoin traded just below $25,000, while ether traded just above $1,700.

The volatility caused over $140 million in bitcoin futures and $80 million in ether futures to take losses. Of this, 58% of futures losses came from shorts or bets against price increases, while the remainder came from longs or bets on price increases – 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 saw $8 million and $5 million in liquidations, respectively, as trading volume for both increased with fundamental developments.

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

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

“While many have viewed bitcoin as a hedge against inflation and tracked its price movements accordingly, bitcoin’s relationship with traditional finance is more complex,” Adelman said, adding that bitcoin served as an “alternative to the traditional financial system in general.” “

“Weakness across the banking sector has increased 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 securely holding and moving money,” Adelman said.

Bitcoin (BTC) dominance rate has increased amid increasing turbulence in the crypto markets, according to TradingView data. This came as the Federal Home Loan Bank of San Francisco says it did not force Silvergate to repay advances, which was rumored to be the reason 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.”

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