Bitcoin (BTC) refused to let the $20,000 support die for good on March 11 as the weekend opened up to a battle over lost ground.
Bitcoin Shakes Off USDC Drop
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hovering around $20,200 at the time of writing.
A brief dip below the $20,000 mark overnight was short-lived and the mood looked more stable as the initial panic over US banking stability subsided.
However, the Silicon Valley Bank (SVB) collapse, which followed Silvergate and dealt a further blow to some cryptocurrency companies, continued to occur.
At the center of the debacle was payment technology company Circle, which revealed overnight that it had part of the reserve funds for its stablecoin, USD Coin (USDC), with SVB.
USDC immediately began to slide from its peg to the US dollar and was redeemable at the time of writing for just $0.91. At one point, Bitcoin was worth over $26,000 in USDC terms on major exchange Kraken.
“If USDC is only 90% backed, the breakeven price is NOT $0.90. The equilibrium price is ZERO. reacted Cory Klippsten, CEO of Swan Bitcoin, adding:
“Everyone has the incentive to redeem as soon as possible for $1. You don’t want to be in the bottom 10%, with all the money already spent.”
Others believed that the situation was manageable and that USDC, the second largest stablecoin by market capitalization, would not fail completely.
2/ The worst has already happened
We now know that 8.2% (USD 3.3B out of USD 40B) is currently stuck in SVB, but it doesn’t mean that the money is gone.
As Adam pointed out, in a similar FDIC recovery process, we can expect a 94% payout.
So the damage could be around USD 198M USD. https://t.co/xvshlKuCmZ
— Ignas | DeFi Research (@DefiIgnas) March 11, 2023
In a TweetCircle said it had five other banking partners to manage its USDC cash reserves.
Funding rates mimic the FTX mood
Beyond the USDC, unsurprisingly, jitters among traders remained.
Average funding rates were more negative since the FTX aftermath in November 2022, indicating a strong belief that more losses could still hit Bitcoin.
However, when analyzing the implications, commentator Tedtalksmacro argued that an overwhelming bearish bias could provide fuel for a classic bullish “short squeeze” on BTC/USD.
“The market is still very short here, still. And that could provide fuel for BTC to test at least 21,400 in the near term.” He said part of a tweet
Tedtalksmacro added that a squeeze was already “very much underway” based on Bitcoin’s rebound from multi-week lows below the $20,000 mark.
Other popular market participants favored a return to the downside in the near term.
“Amidst today’s madness, Bitcoin is still good. I anticipate another decline to the interim support zone around $19,200”, said Crypto Tony to his followers.
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