Bitcoin and the cryptocurrency markets are facing choppy waters right now, both internally and externally.
Internally speaking, today brings the โ some would say inevitable โ news that prominent crypto bank Silvergate Capital has filed for voluntary liquidation.
Exposure to FTX, once part of its marketing strategy, was ultimately the bank's downfall, ending the 27-year-old financial institution.
Few were surprised by the news; virtually every major client, from Coinbase to Digital Galaxy (TSX-V:GLXY)it had jumped ship in the preceding weeks due to growing concerns about the bank's financial health.
There is more to say about the collapse of the bank, but as for the markets, the concern among investors is that this could lead to another outbreak of crypto contagion. However, as an FDIC-insured financial institution, the situation is not the same as that of FTX, Celsius et al.
External pressures for crypto markets come in the form of stern warnings from the US Federal Reserve and other major central banks around the world not to get complacent with the disinflation process.
As Fed Chairman Jerome Powell said on Tuesday: "Recent economic data has been stronger than expected, suggesting that the final level of interest rates is likely to be higher than anticipated."
This aggressive rhetoric is fueling a stubbornly strong US dollar: In a year in which we were supposed to see a pullback, the US Dollar Index (DXY) is up almost 3.5% since February 1.
A strong dollar generally means weaker risk assets and as for bitcoin (BTC), that is what we are seeing right now.
Bitcoin (BTC) Nears Pre-FTX Levels โ Source: currency.com
After closing another 2.2% lower on Wednesday, the BTC/USDT pair saw a fresh drop this morning, taking the pair below $21,700 for the first time in over three weeks.
The Binance order book suggests a short-term downside, although buyer support at $21,500 should help stem losses below that (with the caveat that there are absolutely no guarantees).
Options expiries tomorrow overwhelmingly favor bears, unless Bitcoin manages to break above $23,000. Coupled with the possibility of strong US jobs data to emerge tomorrow (usually a boon for Fed hawks), there could be more headwinds for Bitcoin this week.
After falling 2% at the close on Wednesday, Ethereum (ETH) appears to have stabilized on ETH/USDT above $1,530, where a fairly strong wall of support can be seen on the Binance order book.
Additional support from buyers launches at the US$1,500 fixed price point.
In the altcoin space
Global crypto market capitalization fell below $1 trillion for the first time since mid-February, driven lower by sharp overnight losses for the top 20 as a whole, including Polygon (MATIC), Solana (SOL), Avalanche ( AVAX) and Uniswap (UNI).
Ripple (XRP) was once again the outlier, adding more than 3% as investors remain optimistic about a positive pending outcome in the SEC v Ripple Labs litigation.
Looking beyond the set of top 200 altcoins, Kava (KAVA) outperformed the market with a 10% gain, while Toncoin (TON) and OKB added low digits to their market capitalizations.
The total value locked in the decentralized finance (DeFi) space currently fell 2% overnight to US$47.2 billion.
