- Crypto volatility is back to previous levels when FTX collapsed in November
- $791 million in liquidations spooked investors between Thursday and Sunday
- $383 million in longs were liquidated on Thursday and Friday, the highest 48-hour total of the year
- The news that SVB deposits were full pushed the market higher late on Sunday, with $150 million worth of short sellers being liquidated as bitcoin retook $22,000.
- Despite stabilizing Fed steps and showing a bounceback in 2023, the long-term implications for the crypto market are negative here and investors should be worried
For once, it’s not doing crypto. Trade-fi was feeling left out of the party, understandably, as the banking sector faltered in a big way this weekend.
Silicon Valley Bank (SVB) is no more, in what amounts to the biggest collapse of a US bank since 2008, when Lehman Brothers did its best Satoshi Nakamoto impression and disappeared into the ether (no pun intended).
While the drama may have centered in trade-fi, cryptocurrencies sprung aggressively over the weekend as a number of knock-on effects occurred. SVB was a crypto-friendly bank, as was Silvergate, which was also announced to be closing last night.
This, as well as the fact that the entire financial markets faltered, means that crypto has been weathered by a storm. Some of the movements we’ve explored here https://coinjournal.net/ To sum up the carnage.
With violent price fluctuations, liquidation was inevitable. Long got out badly on Thursday and Friday, because bitcoin price fell south of $20,000.
There were $249 million in long liquidations on exchanges on Thursday, Friday brought in an additional $134 million. Long liquidations of $383 million were the highest in any 48-hour period this year.
Obviously, the liquidation stems from volatility. Volatility is now back to last seen levels as bitcoin looks to dissect range of movements ftx collapsed in November.
The chart below shows that the metric continued to rise before SVB went poof, bringing it back to the 3-day volatility mark of 50%, last seen on Sam Bankman-Fried’s Fun and Games. appeared before the public.
“We are seeing relatively muted action in the crypto markets since the collapse of FTX last November” Max Coupland, director of CoinJournal, said. “The SVB event served to bring volatility back to levels last seen among all crypto scams of the past year – not only FTX, but Celsius, LUNA etc. The difference with this event is that the crash resulted in the trade-fi I had sparked a change”.
crypto bounces back
But all’s well that ends well. Or something along those lines, as the Fed announced last night after a weekend of chaos, that all deposits in SVBs would be met in full, despite the SVB being under.
The bail-out (if you can call it that, as the SVB is still underway) calmed fears in the markets that the issue could be systemic. With bitcoin back up to $22,000 at the time of writing, crypto is roaring back. And this time, it was the shorts that got caught offside, liquidating $150 million across the market on Sunday.
Perhaps the biggest winner was the world’s second largest stablecoin, USDC. 25% of the stablecoin’s reserves are backed by cash. Crucially, 8.25% ($3.3 billion) of reserves were (are) stranded in SVB, with the stablecoin falling below 90 cents on several major exchanges over the weekend.
1/ Following confirmation late today that wires initiated to remove balances on Thursday had not yet been processed, $3.3 billion of the ~$40 billion of USDC reserves remain in SVB.
— Circle (@circle) March 11, 2023
At press time, the peg has been largely restored as the crypto market surges upward, with bitcoin north of $24,000.
What next for crypto?
And so, the immediate storm appears to have dissipated in Cryptoland.
Nonetheless, the past few days present as yet another crushing blow. The three big crypto banks – SVB, Silvergate and Signature – are no more. Unlike the regular banking hours of the banking sector, these banks allowed crypto firms to offer on-ramping access to crypto 24/7 through their settlement services.
Liquidity and volume may thus drop even further in the crypto market, after a year that has already seen volume, prices and interest in the space freefall.
The long-term future of the cryptocurrency industry in the US has taken another heavy blow this weekend, despite the Fed taking steps to increase deposits and thus stabilizing the currency market and broader crypto prices. And with the US being the largest financial market in the world, this is very bad news.
Coupled with the regulatory clampdown by the SEC over the past few months, 2023 largely follows 2022 in creating a more hostile and bearish environment for the sector.
So crypto investors may have seen a jump in prices over the past few months, but this appears to be largely a macro-driven correlation with the stock market, due to underlying events in the industry – deregulation, more bankruptcies, and crypto-friendly bank shutterings. – haven’t been positive.
If you use our data, we would appreciate the link back https://coinjournal.net, Attributing our work with a link helps us keep providing you with data analysis research.