Total crypto market cap takes a hit amid Silvergate Bank crisis

The cryptocurrency markets experienced a relatively quiet month in February as the total market capitalization increased by 4% during the period. However, fears of regulatory pressure appear to have an impact on volatility in March.

Bulls will undoubtedly miss the technical pattern that has driven the overall crypto market value higher over the past 48 days. Unfortunately, not all trends last forever, and the 6.3% price correction on March 2 was enough to break below the ascending channel support level.

As shown above, the rising channel that started in mid-January saw its $1.025 trillion market cap break after Silvergate Bank, a major player in crypto entry and exit, saw its stock plunge 57.7% on the New York Stock The Exchange on March 2 announced Silvergate’s “further losses” and suboptimal capitalization, potentially triggering a bank run that could see the situation spiral out of control.

Silvergate provides financial infrastructure services to some of the world’s largest cryptocurrency exchanges, institutional investors and mining companies. Consequently, clients were encouraged to seek alternative solutions or sell their positions to reduce exposure to the crypto sector.

On March 2, bankrupt cryptocurrency exchange FTX revealed a “massive shortfall” in its holdings of digital assets and fiat currencies, contrary to its earlier estimate that $5 billion could be recovered in cash and liquid crypto positions. On February 28, former FTX engineering director Nishad Singh pleaded guilty to charges of wire fraud along with conspiracy to commit wire and goods fraud.

With billions worth of customer funds missing from the exchange and its US-based arm, FTX US, it has less than $700 million in liquid assets. In total, FTX recorded a deficit of $8.6 billion across all wallets and accounts, while FTX US recorded a deficit of $116 million.

The 4% weekly decline in total market capitalization since February 24 was driven by a 4.5% loss from Bitcoin (BTC) and Ether’s (ETH) 4.8% price decline. As expected, only six of the top 80 cryptocurrencies had positive results in the last seven days.

EOS gained 9% after the EOS Network Foundation announced the final testnet for the Ethereum Virtual Machine launch on March 27.

Immutable X (IMX) rose 5% as the project became a “Unity Verified Solution,” which reportedly allowed for seamless integration with the Unity SDK.

DYdX (DYDX) traded down 14.5% as investors await a $17 million token unlock on March 14.

Lending demand is balanced despite the recent price correction

Perpetual contracts, also known as inverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use this fee to avoid imbalances in currency risk.

A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to become negative.

The seven-day funding rate was marginally positive for Bitcoin and Ether, reflecting a balanced demand between leverage longs (buyers) and shorts (sellers) using perpetual futures contracts. The only exception was the slightly higher demand for bets against BNB’s (BNB) price, although it was far from an alarming level of 0.2% per week.

Related: Dollar’s strong rally puts Bitcoin’s $25,000 breakout prospects in jeopardy

The put/call ratio options reflect traders’ optimism

Traders can gauge the overall sentiment of the market by gauging whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, while put options are for bearish strategies.

A put-to-call ratio of 0.70 indicates that put open interest lags the more bullish calls and is therefore bullish. Conversely, a 1.40 indicator favors put options, which can be considered bearish.

Except for a brief moment on March 2 when Bitcoin’s price traded down to $22,000, demand for bullish calls has exceeded neutral-to-bearish sales since February 25. Moreover, today’s 0.71 put-to-call volume ratio shows that the Bitcoin options market is more heavily populated by neutral-to-bullish strategies that favor call (buy) options.

From a derivatives market perspective, the market showed resilience, so Bitcoin traders may not expect further corrections despite the bearish indicator from the failed ascending channel. The 4% weekly decline in total market capitalization reflects the uncertainty that Silvergate Bank brings, and is unlikely to have roots deep enough to cause systemic risk.

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.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.