The latest week has been, perhaps, the worst week for the crypto market since the FTX crash.
After Biden's latest budget and the collapse of Silvergate, Silicon Valley Bank once again brought a heavy blow to the encryption market. Under the double impact of uncertain macro policies and potential black swans, Bitcoin fell below $20,000 for the first time in nearly two months.
OKX Ouyi market shows that this morning, Bitcoin once fell to 19,770 US dollars. At present, it is temporarily reported at 20,043 US dollars, a 24-hour drop of 7.38%.
Looking at the entire encryption market, mainstream currencies collectively fell. According to Coingecko data, almost none of the top 50 cryptocurrencies by market capitalization, except for stablecoins, were spared in the past 24 hours. The two currencies fell by more than 10%, namely: APE (-11.4%) and TRX (-11.3%). 34 coins fell by more than 5%. Only two currencies rose against the trend, namely APT (8.0%) and ATOM (1.8%).
Affected by the downturn of the overall market, the market value of the entire encryption market is now about 936 billion U.S. dollars, and it has fallen below the trillion U.S. dollar mark on March 9. The selling sentiment of encrypted users is obvious, and the Bitcoin panic and greed index is 34, showing obvious panic.
The current trading enthusiasm in the market has formed a sharp contrast with the high pitch a few days ago. With such a change in such a short period of time, what happened to the market?
Banking Crisis Ripples to Crypto Markets
One of the major banks in the United States serving cryptocurrency companies, Silvergate, announced voluntary liquidation on March 8, which was one of the main reasons that affected the crypto market not long ago.
And when Silvergate, known as the "last thunder" of this round of bear market, ended, to the surprise of investors, the crisis outside the encryption market spread again. The website of the famous Silicon Valley Bank was down yesterday as customers of the bank struggled to withdraw funds from their bank accounts. Some customers said that now they can only view the account access control, but cannot complete withdrawals or transfers. The bank's CEO said this morning that he hoped customers would remain calm and that the bank had "sufficient liquidity" to support customers.
For a time, the stock price of Silicon Valley Bank plummeted by more than 60%, and its market value evaporated nearly 10 billion U.S. dollars in one day. The bank's mine explosion may trigger a chain reaction that will affect the entire encryption market.
Recently, due to the Fed's continued interest rate hikes, U.S. bond prices have continued to fall. There are signs of nervousness in financial markets as the inverted bond curve reaches its highest level since the 1980s. Yields on longer-dated Treasuries were stagnant at 4%, while two-year yields topped 5% in March.
Late yesterday night, Silicon Valley Bank said it sold all of its $21 billion of marketable securities. Silicon Valley Bank's portfolio is basically made up of U.S. Treasury bonds and mortgage-backed securities. This also brought it an after-tax loss of about $1.8 billion, which will be booked in the first quarter of 2023.
To offset losses from asset sales, SVB said it was raising $2.25 billion, including $500 million from private equity firm General Atlantic, and offering $1.25 billion in convertible preferred and common stock to investors.
The news caused a thousand waves with one stone. The market has questioned SVB one after another, worrying that the bank's situation will deteriorate further, and even fall into a liquidity crisis.
Affected by this panic, U.S. bank stocks fell one after another. Bank of America and Wells Fargo fell more than 6%, JPMorgan Chase fell more than 5%, and Citigroup fell more than 4.1%. The Philadelphia Bank index plunged 7.7%.
Silicon Valley Bank sparks FUD
In recent years, Silicon Valley Bank has been well-known in the venture capital circle and has taken a considerable market share in the start-up field. The bank provides banking and venture lending services to start-up technology companies.
If a large number of start-ups are implicated, it may lead to corporate bankruptcy, fund liquidation, bank bankruptcy, and the bursting of the technology stock bubble, which will repeat the horror scene when the Internet bubble burst at the beginning of this century. The risk of further inducing a financial crisis is not zero.
And out of fear of a bank run, many entrepreneurs have begun to withdraw funds from this bank. Several top VC firms, including Coatue and Founders Fund, have advised some firms that they would strongly consider pulling money from SVB amid growing concerns about its stability.
Union Square Ventures said it "keeps only a minimal amount of money in the SVB cash account".
The CEO of Y Combinator has warned his portfolio startups that the solvency risk from Silicon Valley Bank is real, and suggested they should consider limiting their exposure to the lender, ideally to no more than $250,000.
Tribe Capital made a suggestion: If it is impossible to withdraw cash from Silicon Valley Bank completely, it should also withdraw some funds.
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Circle uses Silicon Valley Bank to hold reserves
According to the content of Circle's audit report in January this year, Circle has reserves in several regulated financial institutions in the United States, including Silicon Valley Bank (Silicon Valley Bank) and Silvergate. The report was reviewed and certified by Deloitte. Previously, Circle announced that it had transferred a small portion of USDC reserves held by Silvergate to other banking partners.
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Time to buy the bottom?
On March 7, when the macroeconomic situation continued to deteriorate, the Federal Reserve continued to make hawkish statements.
On March 8, crypto-friendly bank Silvergate Bank announced it would be voluntarily going into liquidation and winding down operations.
U.S. cryptocurrency miners could end up paying a 30 percent tax on electricity costs under a budget proposal aimed at “reducing mining activity,” according to a supplemental budget explainer from the Biden administration on March 9.
Recently, uncertainty and panic in the market have been increasing. Over the past 24 hours, the price drop led to more than $100 million in liquidations, according to Coinglass.
How will the market outlook develop? Is the bear market about to usher in its last moment?
Arthur Hayes, founder of BitMEX, tweeted, "Powell may have punctured the US banking system crisis. In 2008, it was the bank's bad credit portfolio, which is the subprime mortgage crisis. In 2023, it is the bank's long-term bond portfolio, such as UST and UST. MBS. If there is a big drop, please remember March 2020, big drop, bailout, then big rise!? I am ready."
Joe DiPasquale, CEO of cryptocurrency fund management company BitBull Capital, made an analysis: "Silvergate is one of several factors for the downward test of Bitcoin. In addition, further interest rate hikes by the FOMC and weakening of the stock market, SEC's scrutiny, Both are driving the market down. Taken together, the market continues to tighten and retest support levels. As we have said since January, we believe that BTC will test support below $20,000 before rising again. We think $18,000 will be the next major support level."
