$920B is the number to watch now that crypto’s total trillion dollar market cap is gone

Big round numbers always pique the interest of investors, and the total crypto market cap of $1 trillion is no exception. It’s a level that held for 48 days before collapsing on March 9. After a 16-hour negative price movement of 8.6%, the indicator fell to $914 billion, the lowest level since January 13.

Concerns about the stability of the US banking industry, particularly the fall and subsequent closure of Silvergate Bank (SI) on March 8 and the closure of Silicon Valley Bank (SVB) on March 10 by the California Department of Financial Protection and Innovation, are among the reasons for breaking under the capitalization aid of 1 trillion dollars. Silvergate was a critical fiat gateway network for the main cryptocurrency exchanges and intermediaries.

The California Department of Financial Protection and Innovation did not provide an explanation for SVB Bank’s closure. Nonetheless, it stated that the financial institution will be the first FDIC-insured institution to fail in 2023.

Silicon Valley Bank had more than $200 billion in assets and provided financial services to a number of crypto-focused venture firms, including Andreessen Horowitz and Sequoia Capital.

However, don’t forget the ongoing efforts of the US Federal Reserve to curb inflation, which include raising interest rates above 2% in August 2022 and reducing its balance sheet through asset sales. In addition to this, US labor market data released on March 10 revealed the creation of 311,000 jobs in February 2023, supporting the view that the Fed’s anti-stimulus measures require additional firepower.

The unexpected result of the central bank’s cautious stance is a greater likelihood of a longer and more severe economic downturn. Investors demanded higher yields for two-year Treasuries versus longer-term dated bonds, sending the inverted bond curve to its highest level in 40 years.

What is the significance of the $920 billion market cap?

A notable setback occurred when the total crypto capitalization reached $920 billion, indicating large buyers around that level, which may seem insignificant at first, but is critical for Bitcoin (BTC), the leading cryptocurrency. To begin with, one must understand that Bitcoin accounts for about half of the total crypto capitalization when stablecoins are excluded.

As a result, Bitcoin’s market cap of $380 billion serves as the basis for the $920 billion total. Three reasons explain why such a level is critical from a valuation point of view.

Bitcoin remains a top-20 global tradable asset, valued at over $380 billion, ahead of retail giant Walmart ( WMT ), international payment processor Mastercard ( MA ) and highly profitable consumer discretionary Procter & Gamble ( PG ). It becomes more difficult to attribute fault after such a remarkable achievement.

Despite Bitcoin’s 50% decline in 12 months to $19,650, its performance is comparable to that of billion-dollar companies such as Credit Suisse Group (CS) down 63%, First Republic Bank (FRC) down 51%, Warner Bros. (WBD) 43%, and Intel Corporation (INTC) 43%.

Finally, maintaining its capitalization of $380 billion, it remains the seventh largest global base money compared to fiat currencies. For example, the Australian dollar (AUD) has a money supply of $378 billion, while the Canadian dollar (CAD) has a money supply of $220 billion. The Indian Rupee, with a monetary base of $500 billion, is the next potential target.

Currently, the option’s put/call ratio is stable

Traders can gauge the overall sentiment of the market 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 the multiple call options and is therefore bullish. Conversely, a 1.40 indicator favors put options, which is a bearish sign.

Related: The South Dakota government vetoes the bill that excludes crypto from the definition of ‘money‘

Since March 8, protective puts have been in demand, indicating derivatives traders’ risk aversion. Apart from a brief surge on March 9 when the put-to-call ratio jumped above 1.50, nothing was out of the ordinary as the move coincided with the Bitcoin price falling below $22,000.

The gap favoring the put option risk metric had narrowed, indicating that even professional traders found themselves shorthanded as the crypto market continued to fall to new lows.

More importantly, the Bitcoin options market is showing no signs of stress, which is encouraging given the enormous pressure from the banking sector and the prospect of a declining economy.

The views, thoughts and opinions expressed herein are those of the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.