Bitcoin Regains $20K After $200M In Crypto Liquidations; Some traders are brushing off USDC fears
Bitcoin and Ether rallied as much as 4% in the past 24 hours after a steep fall on Friday as contagion risks from the collapse of Silicon Valley Bank spread to crypto markets, specifically the exposure of USD Coin issuer Circle to the bank.
Ether (ETH) rose above $1,450 while bitcoin (BTC) jumped above $20,000 on Saturday to post early signs of market stabilization. Both tokens fell below strong resistance levels on Friday.
Other cryptocurrencies did not make similar gains, but indicated that traders were not taking risks on lesser-known tokens just yet. Polygon’s matic (MATIC) was up 1.6% while BNB Coin (BNB) and XRP were up a nominal 2% in Asian evening hours on Saturday.
Sudden and steep market moves occurred on Friday when regulators shut down SVB amid a run on the bank. Traders panic sold their token holdings as USDC fell to as low as 87 cents early Saturday, spurring a selloff that
Total crypto market cap fell below $920 billion for the first time since November, while over $200 million worth of crypto-tracked futures were liquidated in the past 24 hours.
Nearly $60 million in bitcoin futures were liquidated, the most among major cryptocurrencies, followed by $40 million in ether futures liquidations. Such liquidators likely contributed to the crash in bitcoin and ether.
Liquidation occurs when a trader does not have enough funds to keep a leveraged trade open.
Meanwhile, some market analysts brushed off lingering USDC fears by pointing to the token’s backing from the US Treasury.
“80% of their assets are in the form of 6 million US Treasury bills,” wrote one Crypto Twitter Community Member. “85% of these bills have been rolled over in the last 3 months. The interest rate risk is negative.”
Adam Cochran, partner at crypto fund CEHV, said SVB’s FIDC-backed nature suggested fears about the longevity of USDC were overblown.
“Good comparable for the FDIC recovery process – the entity had 62% of its balances paid out right away under the FDIC ‘advanced dividend’ process, and by final payment had recovered 94%,” Cochran said. “If similar at SIVB, Circle’s maximum damage is $198 million out of $3.3 billion.”
Elsewhere, North Rock Digital co-founder Hal Press tweeted that 77% of Circle’s reserves were held in US T-bills – citing official documents – meaning that the theoretical floor price of USDC was 77 cents.
“Circle holds 77% of its reserves in 1-4 month T-Bills. These T-Bills are held at BNY Mellon and managed by Blackrock. This gives an absolute floor on USDC of 0.77,” Press said.
