Big round numbers always pique investor interest and the total crypto market capitalization of $1 trillion is no exception. It's a level that held for 48 days before collapsing on March 9. After a 16-hour negative 8.6% price move, the gauge fell to $914 billion, its lowest level since Jan. 13.
Concerns about the stability of the US banking industry, specifically the crash and subsequent Closure of Silvergate Bank (SI) on March 8 and closure of Silicon Valley Bank (SVB) on March 10 by the California Department of Financial Protection and Innovation, are among the reasons it broke below the $1 trillion capitalization support. Silvergate was a critical fiat gateway network for major cryptocurrency exchanges and brokers.
The California Department of Financial Protection and Innovation did not provide an explanation for the closure of SVB Bank. However, he stated that the financial institution will be the first FDIC-insured institution to fail in 2023.
Silicon Valley Bank owned more than $200 billion in assets and provided financial services to several crypto-focused venture firms, including Andreessen Horowitz and Sequoia Capital.
However, don't forget the US Federal Reserve's ongoing efforts to curb inflation, including raising interest rates above 2% in August 2022 and reducing its balance sheet through asset sales. On top of this, US labor market data released on March 10 revealed the creation of 311,000 jobs in February 2023, supporting the idea that the Fed's anti-stimulus measures require more power. of additional fire.
The unexpected result of the central bank's cautious stance is an increased probability of a longer and more severe economic downturn. Investors demanded a higher yield for two-year Treasury notes compared to longer-maturity bonds, prompting the inverted bond curve reach its highest level in 40 years.
What is the significance of the $920 billion market cap?
A notable bounce occurred when total crypto capitalization reached $920 billion, indicating that there are big buyers around that level, which may seem insignificant at first, but is critical for Bitcoin (BTC), the leading cryptocurrency. To begin with, one must understand that Bitcoin accounts for about half of the total crypto capitalization when stablecoins are excluded.
As a result, Bitcoin's $380 billion market cap serves as the base for the $920 billion total. Three reasons explain why such a level is critical from a valuation point of view.
Bitcoin remains one of the top 20 tradable assets globally, valued at over $380 billion, ahead of retail giant Walmart (WMT), international payment processor Mastercard (MA) and highly profitable consumer discretionary 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 multi-billion dollar companies like Credit Suisse Group (CS) down 63%, First Republic Bank (FRC) 51%, Warner Bros. (WBD) 43% and Intel Corporation (INTC) 43%.
Lastly, while maintaining its capitalization of $380 billion, it remains the seventh largest base money in the world when compared to fiat currencies. 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.
At the moment, the put/call option ratio is stable
Traders can gauge overall market sentiment by gauging if there is more activity through call options or put 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 the open interest of the put option lags behind the call options and is therefore bullish. Conversely, a 1.40 indicator favors put options, which is a bearish sign.
Related: South Dakota government vetoes bill that excludes cryptocurrencies from the definition of "money"'
Since March 8, hedge put options have been in higher demand, indicating the risk aversion of derivatives traders. Other than a brief rally on March 9, when the put-to-call ratio jumped above 1.50, nothing was out of the ordinary, as the move coincided with the price of Bitcoin falling below 22,000. Dollars.
The gap favoring the put options risk metric had been narrowing, indicating that even professional traders were becoming shorthanded as the crypto market continued to plunge to new lows.
More importantly, the Bitcoin options market is showing no signs of stress, which is encouraging given the immense pressure from the banking sector and the prospects for a declining economy.
The views, thoughts and opinions expressed here 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 do their own research when making a decision.
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