The Roller-Coaster Ride of Crypto
If we list the worst things that could happen to the crypto market, USDC's de-pegging would probably be in the top five. The thing I was most worried about in the crypto market was Tether losing its peg. On Saturday, the most reliable stablecoin, USDC, lost its peg. In the hours after USDC lost its peg, something surprising happened: Bitcoin managed to hold on to the USD 20k resistance. And the USDC price stabilized around 90 cents. The US Treasury Department's statement on Silicon Valley Bank was that deposits up to 250k USD were covered by insurance.
The loss of USDC's peg was not reflected as a sale to BTC and Ethereum. Because people were selling USDC and buying Bitcoin and Ethereum, which they saw as safe havens, this situation probably contributed to several exchanges restricting dollar withdrawals. For whatever reason, the value of Ethereum and Bitcoin should further fall in the face of such a significant crisis.
Nothing in the past year has alarmed me more than the loss of USDC's peg. Most of my investments are tied to illiquid assets like Hive power, Leo power, and Splinterlands cards. Therefore, I would not sell cryptocurrencies until the dust around was rinsed. Last year, I took a 300 USDC loan by collateralizing my Bitcoins through AAVE. I paid some of my debt at a discount when the USDC price dropped to around 90 cents. In such crisis moments, DEFI networks do not work very well. In the first hours of the crisis, gas prices rose to astronomical levels. Even though the gas price fell to a more reasonable level afterward, it took about half an hour for the transaction to occur. So the Polygon network could have done better in this crisis.
Over the weekend, US financial officials worked a lot of overtime. In the meantime, they saw that the concern about banks was increasing. Silicon Valley Bank(SVB)'s failure to pay its depositors would negatively impact the US tech ecosystem because SVB was a bank heavily used by tech start-ups. Therefore, paying all depositors was critical for the USA to compete in technology. On the other hand, the US Treasury changed its mind mainly because they were worried about the increasing number of bankrupt banks.
What Is Next?
As a result, Circle, which issues USDC, will be able to receive all of its deposits at Silicon Valley Bank. Today, USDC is again back on the $1 peg, and a rally has started in the crypto market. So much so that Bitcoin is approaching the resistance at USD 25k and Ethereum at USD 1700. The banks' insolvency was related to the rising interest rates depressing the value of their treasury bonds. Therefore, the FED is no longer as comfortable as it was about raising interest rates. Last week, the Fed's 50 basis point rate hike became the most likely scenario. Nobody talked about a 50 basis point increase after three banks had difficulty paying. Goldman Sachs announced its forecast that the FED would not raise interest rates on March 22. Futures pricing shows a rise of 25 basis points is an 80% probability. There is a 20% probability that the Fed will not raise interest rates at the next meeting.
Those who remember 2008 know that the banking crisis is not a joke. Purchases in the crypto market are not in vain. After the recent events, the FED will be more restrained in its actions and discourses.
The price of Bitcoin, which fell below 20k on Saturday, is at the level of 24k USD. Bitcoin is up 16% compared to yesterday. High-rate price changes can herald significant trend changes. At the end of the week, the bears started to pronounce figures like 16k USD in Bitcoin again. The wind suddenly changed direction, and crypto prices skyrocketed today.
The most important question we have to answer is when the bear market will end. Bitcoin and Ethereum prices have been hovering above their 200-day simple averages for two months. Moreover, they tested their 200-day simple average on Saturday. To declare the end of the bear market, Bitcoin must break the USD 25k and Ethereum USD 1700 resistances. I'm in no hurry. I have invested in Hive assets for five years and do not intend to give up.
Thank you for reading.
Cover Image Source: Midjourney App
Posted Using LeoFinance Beta