Big round numbers always pique the interest of investors, and the $1 trillion total crypto market capitalization is no exception. This is a level that held for 48 days before collapsing on March 9. After a 16-hour negative price movement of 8.6%, the gauge fell to $914 billion, its lowest level since January 13.
Concerns about the stability of the US banking industry, particularly the crash and its aftermath closure of Silvergate Bank (SI) on March 8 and closing Silicon Valley Bank (SVB) on March 10 by the California Department of Financial Protection and Innovation, are among the reasons for a break below the $1 trillion capitalization support. Silvergate was a critical fiat gateway network for the most important cryptocurrency exchanges and intermediaries.
The California Department of Financial Protection and Innovation did not provide an explanation for the closure of SVB Bank. However, it said the financial institution would be the first FDIC-insured institution to fail in 2023.
Silicon Valley Bank holds more than $200 billion in assets and provides financial services to a number of crypto-focused venture companies, including Andreessen Horowitz and Sequoia Capital.
But don’t forget the US Federal Reserve’s ongoing efforts to curb inflation, which include raising interest rates above 2% in August 2022 and reducing its balance sheet through asset sales. In addition to this, US labor market data released on March 10 revealed 311,000 job creation in February 2023, supporting the idea that the Fed’s anti-stimulus measures require additional firepower.
The unintended consequence of the central bank’s cautious stance is a greater likelihood of a longer and more severe economic downturn. Investors demanded higher returns for two-year Treasury bills versus longer-dated bonds, causing inverted bond curve to reach its highest level in 40 years.
What is the significance of a market cap of $920 billion?
A remarkable bounce occurred as the total crypto capitalization reached $920 billion, indicating large buyers around this level, which may seem minor at first, but is critical for Bitcoin (BTC), the leading cryptocurrency. For starters, it should be understood that Bitcoin represents roughly half of the total crypto market capitalization when stablecoins are excluded.
As a result, Bitcoin’s market capitalization of $380 billion serves as the basis for the total value of $920 billion. Three reasons explain why such a level is critical from an evaluation point of view.
Bitcoin is still a top 20 global tradable asset valued at more than $380 billion, ahead of retailer giant Walmart ( WMT ), international payment processor Mastercard ( MA ) and high-yield consumer discretionary company Procter & Gamble ( PG ). It becomes harder to attribute failure after such a remarkable achievement.
Despite Bitcoin’s 50% drop in 12 months to $19,650, its performance is comparable to that of billion-dollar companies such as Credit Suisse Group (CS) at 63%, First Republic Bank (FRC) at 51%, Warner Bros. ( WBD ) 43%, and Intel Corporation ( INTC ) 43%.
Finally, maintaining its capitalization of $380 billion, it remains the seventh largest global fiat currency. For example, the Australian dollar (AUD) has a money supply of $378 billion, while the Canadian dollar (CAD) has a money supply of $220 billion. The Indian rupee, with a monetary base of $500 billion, is the next potential target.
Currently, the put/call ratio of the options is stable
Traders can gauge overall market sentiment by measuring 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 ones.
A put-call ratio of 0.70 indicates that open interest in the put option lags more call options and is therefore bullish. In contrast, the 1.40 indicator favors put options, which is a bearish sign.
Connected: South Dakota government vetoes bill to exclude crypto from definition of “money”.‘
Since March 8, defensive puts have been in higher demand, indicating that derivatives traders are risk averse. Apart from a brief overshoot on March 9, when the put-call ratio jumped above 1.50, nothing was out of the ordinary as the move coincided with Bitcoin falling below $22,000.
The gap in favor of the put options risk indicator is narrowing, showing that even professional traders are finding themselves shorthanded as the crypto market continues to fall to new lows.
More importantly, the Bitcoin options market shows no signs of strain, which is encouraging given the huge pressure from the banking sector and the outlook for a shrinking economy.
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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.
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