Bitcoin Price Rises to ‘$26K’ in USDC Terms — How High Can the BTC Short Press Go?
Bitcoin (BTC) refused to let $20,000 support die for good on March 11 as the weekend opened with a battle for lost ground.
Bitcoin shakes off USDC peg
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD circulating $20,200 at the time of writing.
A brief drop below the $20,000 mark overnight was short-lived and sentiment appeared more stable as the initial panic over US banking stability subsided.
The collapse of Silicon Valley Bank (SVB), which followed Silvergate in dealing another blow to some crypto firms, still continued to play out.
At the heart of the debacle was payment technology company Circle, which overnight revealed that it held part of the reserve funds for its stablecoin, USD Coin (USDC), with SVB.
USDC immediately began to slip from its US dollar peg and could be redeemed at the time of writing for just $0.91. At one point, Bitcoin was worth more than $26,000 in USDC terms on the main Kraken exchange.
“If USDC is only 90% backed, the equilibrium price is NOT $0.90. The equilibrium price is ZERO,” Cory Klippsten, CEO of Swan Bitcoin, reactedadd:
“Everybody has an incentive to redeem as quickly as possible for $1. You don’t want to be in the last 10%, with all the money gone.”
Others believed the situation was manageable and that USDC, the second largest stablecoin by market capitalization, would not fail completely.
2/ The worst has already happened
We now know that 8.2% ($3.3B of $40B) is currently stuck in SVB, but that doesn’t mean the money is gone.
As Adam pointed out, in a similar FDIC recovery process, we can expect a 94% payout.
So the damage could be around $198 million. https://t.co/xvshlKuCmZ
— Ignatius | DeFi Research (@DefiIgnas) March 11, 2023
In a chirpingCircle said it had five additional bank partners to manage its USDC cash reserves.
Funding rates mimic FTX sentiment
Beyond the USDC, there were predictably jitters among traders.
Related: Circle’s USDC instability causes domino effect on DAI, USDD stablecoins
Average funding rates were at their most negative since the November 2022 FTX aftermath, indicating a strong belief that further losses could still affect Bitcoin.
However, analyzing the implications, commentator Tedtalksmacro argued that overwhelming bearish bias could fuel a classic “short squeeze” higher on BTC/USD.
“The market is still strongly short here, still. And that could fuel BTC to test at least 21.4k in the near term,” part of a tweet read.
Tedtalksmacro added that a squeeze was already “well underway” based on Bitcoin’s rebound from multi-week lows below the $20,000 mark.
Other popular market players favored a return to the downside in the short term.
“Among the craziness today, Bitcoin is still good. I expect another drop down to the temporary support zone around $19,200,” Crypto Tony told followers.
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.
