How Can Bitcoin Hold $28K Amid Banking Crisis?
In today’s Market Report episode, analyst and writer Marcel Pechman discusses whether Bitcoin’s (BTC) $28,000 support has a chance. Next, Pechman analyzes the failure of First Republic Bank and its subsequent acquisition by JPMorgan. The show airs every Tuesday on the Cointelegraph Markets & Research YouTube channel.
The first news article explains why Bitcoin margin and futures indicators are crucial in determining whether whales and market makers have turned bearish as BTC failed to break the $30,000 resistance. First, Pechman explains why the liquidation of $340 million in leveraged futures was important and how it affects the market during surprising price movements.
Using data from the OKX exchange on borrowing and lending markets, Pechamn shows how leverage was used to push Bitcoin’s price close to $30,000 on April 27 and how it played a key role in the subsequent decline to $28,000. Next, the analyst jumps to top traders’ long-to-short data provided by exchanges, which shows whales on OKX and Binance adding leveraged longs between April 25 and May 1.
The conclusion? Bears were not confident enough to add to leveraged short positions, so bulls should not yet throw in the towel as margin and futures indicators remain healthy. Pechman reinforces that a drop down to $26,000 is possible, but data shows that sellers are unwilling to bet on such a move.
For the show’s next topic, Pechman discusses the failure of First Republic Bank (FRB) over the weekend. According to Pechman, it is definitely a bailout, as the U.S. Federal Deposit Insurance Corporation is receiving emergency funding from the U.S. Treasury Department to cover losses.
Why did Bitcoin react negatively to the incident? In Pechman’s opinion, it could be two things: a) the news was already priced in, as Bitcoin rose 7% between April 25 and April 29; b) investors interpreted the move as a strong signal from the government, meaning that they will not let any bank fail without a bailout.
Pechman’s take? The US dollar has already weakened against other major currencies and will continue to devalue if the banking crisis creates other victims. In the end, no depositor gets hurt, but the value of those dollars in the bank is worth less each month. That is why Bitcoin will profit from it, maybe not in the short term, but certainly within one to three years.
In the final part of the market report, Pechman explains what the VIX S&P 500 volatility indicator is and why the recent 16% level, the lowest in 18 months, could mark a cycle top or near-term low. The last time the indicator reached 15% was a month before the S&P 500’s all-time high in December 2021.
