Bitcoin plunges below $20,000 amid a 2008-like banking collapse

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(Kitco News) – It’s a bearish 2008 across financial markets as the failure of Silicon Valley Bank (SBV) – the 16th largest bank in the US by assets – has thrown many industries into turmoil, with VC firms and start-ups now trying to find a way to pay their employees and finance their operations.

The collapse of SBV represents the second biggest bank collapse in US history behind Washington Mutual and has triggered declines across financial markets as the list of threats, from rising interest rates to persistent inflation, continues to push investors into cash. At the end of the markets, the S&P, Dow and Nasdaq all finished in the red, down 1.45%, 1.07% and 1.76% respectively.

Data from TradingView shows that Bitcoin (BTC) bears got an early jump on Friday’s performance, breaking below the psychologically important $20,000 level in early hours and driving the top crypto to a daily low of $19,628 before bulls managed to bid the price back above $20,000 on the afternoon.

BTC/USD 4-hour chart. Source: TradingView

“March Bitcoin futures prices hit a two-month low in early US trading Friday,” Kitco senior technical analyst Jim Wyckoff wrote in his morning BTC update.

“Bears have the near-term technical advantage amid a new price downtrend in place on the daily bar chart,” Wyckoff observed, adding, “The bears have momentum to suggest even more sideways-lower trading in the near term.”

Collateral damage from the collapse of SVB

The widespread concern sparked by SVB’s demise was succinctly put into context by David Lifchitz, managing partner and chief investment officer of ExoAlpha, who noted in a conversation with Kitco Crypto that “The big problem with SVB is not just the bank failure itself, but all the non-linear consequences that will come next week when all your clients have their assets flogged. How will all your startup clients be able to pay their employees next week and beyond?”

SVB is the bank that many tech startups and VC firms use for their treasury, so the big question is how all these companies will be able to function in the very near future, Lifchitz noted. “The problem with bank failures is that they are non-linear, which means they tend to trigger much more than their own demise.”

The move by the FCIC to step in could help partially repay SVB depositors, but there is a good chance that mass layoffs could come for many of these companies, if not outright closure, Lifchitz warned.

As for the crypto market, and more specifically Bitcoin, Lifchitz said the top crypto is trying to find support just below $20,000, “but it wouldn’t take much here to push it back to $19,000 and possibly $17,500 if the SVB situation worsens next once a week.”

On the upside, Lifchitz identified $23,000 as the new resistance level for BTC, but warned “it may take some time to get back there, and a break above $25k looks even more distant today unless the FED makes a U-turn on rates, which is not in their intentions according to President Jerome Powell’s speech a couple of days ago.”

For those who were unable to sell ahead of the pullback in the past two days, “it’s a little too late to sell here, although it’s still possible with a little more downside,” Lifchitz said. “A run back towards $23k from here should be seen as an opportunity to ease up and a break below $19k is a definite sell signal. Only a clean break above $25k-ish should be seen as the start of a new bull move towards $30 k.”

A bright spot in a sea of ​​red

The altcoin market has been hit hard by the weakness in Bitcoin, with the majority of tokens in the top 200 in the red for the day. Even among the winners on the 1-day chart, the fact that their seven-day charts are showing double-digit losses speaks volumes about the struggles facing the crypto market.

Daily performance in the cryptocurrency market. Source: Coin360

The one bright spot worth mentioning is Kava (KAVA), a decentralized bank for digital assets that gives its users access to stablecoins, loans and interest income opportunities for their crypto. KAVA is up 11.35% on the daily chart and 16.82% on the weekly chart as it has attracted the attention of crypto investors looking for a crypto-native decentralized banking platform.

The total cryptocurrency market cap is now $932 billion, and Bitcoin’s dominance rate is 41.1%.