BTC drops below $25,000 as market discusses liquidity and TGA

Bitcoin and Ether began the Asian trading day in the red, with bitcoin down 2.5% to $24,330 and ether down 3.7% to $1,649.

Liquidity is on everyone’s mind, especially in the face of record withdrawals from the Treasury General Account during the Covid era, and more so after the failure of Silicon Valley Bank.

Most recently, something appears to have spooked the Federal Deposit Insurance Corp when it replaced $40 billion in funds it took from the TGA, originally earmarked to ease market disruptions from the closure of SVB.

As Reuters recently reported, TGA was down nearly $100 billion in the last week before the FDIC returned its $40 billion.

“The TGA was drawn down throughout 2023, and that helped markets in general, including bitcoin. But late in the last five days, the TGA had nothing to do with bitcoin’s outperformance,” Mark Connors, head of research at 3iQ, told CoinDesk in a note . “There’s a little bit more confidence that the bitcoin thesis is not only intact, but it’s been validated at a level that we’ve never seen before.”

Connors says this is a confidence issue for the Fed.

“When you see the Fed creating a bubble, popping the bubble and then not knowing what game to play with inflation, or stabilizing the financial markets, it doesn’t inspire confidence,” he continued.

A bigger issue at hand is rate volatility, according to Connors, and the market hates uncertainty.

“The reason it’s important is because the prices are used to price every asset on the planet,” he said. “And when you have uncertainty about interest rates, you have uncertainty about what everything is worth.”

The next meeting of the Federal Open Market Committee is scheduled to take place on 21-22 March.

Bitcoin, Ether Volatility overwhelms both bears and bulls

Higher-than-usual market volatility affected both bulls and bears as crypto futures racked up $300 million in liquidations over a 24-hour period on Wednesday.

Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It occurs when a trader is unable to meet the margin requirements for a leveraged position (does not have sufficient funds to keep the trade open).

Large liquidations can signal the local top or bottom of a steep price movement, which can allow traders to position accordingly.

Bitcoin and ether briefly crossed $26,000 and $1,770 respectively on Tuesday as investors brushed off the longer-term effects of a regulatory cut on crypto-friendly banks and US consumer price index (CPI) data pointed to slowing inflation in the coming months.

Bitcoin’s weekly chart shows that the cryptocurrency is once again struggling to establish a foothold above $25,000, which capped gains last month and into August 2022. According to Chartered Market Technician Aksel Kibar, a breakout above $25,000 will shift focus to the next hurdle at $28,600. “All About Bitcoin” host Christine Lee breaks down the “Chart of the Day”.

But the euphoria was short-lived as both major tokens fell as much as 5% from Tuesday’s highs before gradually stabilizing. In Asian morning hours on Wednesday, bitcoin was trading just under $25,000 while ether was trading just above $1,700.

The volatility saw over $140 million in bitcoin futures and $80 million in ether futures take losses. Of this, 58% of the futures losses came from shorts, or bets against price increases, while the rest came from longs, or bets on price increases – meaning that both short sellers and long traders were hit almost equally.

Among other major tokens, futures on Conflux’s CFX token and Filecoin’s FIL saw $8 million and $5 million in liquidations, respectively, as trading volumes for both rose due to fundamental developments.

Meanwhile, some market observers said the price action came as investors looked for alternative assets after last week’s collapse of Silicon Valley Bank.

“Bitcoin’s rally to a new annual high as Silicon Valley Bank falls and inflation remains stubborn shows that investors are looking to bitcoin for stability in highly uncertain market conditions,” Alex Adelman, co-founder of bitcoin rewards app Lolli, told CoinDesk.

“While many have viewed bitcoin as a hedge against inflation and tracked its price movements accordingly, bitcoin’s relationship with traditional finance is more complex,” Adelman said, adding that bitcoin served as an “alternative to the traditional financial system at large.”

“Weakness across the banking sector has heightened investor awareness of bitcoin’s unique value proposition. In the coming weeks, we will continue to see increased demand for bitcoin as an overarching system for securely holding and moving money,” Adelman said.

Bitcoin (BTC) dominance rate has climbed amid increasing turbulence in the crypto markets, according to TradingView data. This came as the Federal Home Loan Bank of San Francisco says it did not force Silvergate to repay advances, which is rumored to be the reason crypto-focused Silvergate decided to close. Lyn Alden Investment Strategy Founder Lyn Alden and Dunleavy Investment Research Crypto Strategist Tom Dunleavy joined the “First Mover.”