Bitcoin (BTC) refused to let the $20,000 support die for good on March 11 as the weekend opened to a battle for lost ground.
Bitcoin shakes the USDC peg
Data from Cointelegraph Markets Pro and TradingView shows BTC/USD hovering around $20,200 at the time of writing.
A brief drop below the $20,000 mark overnight was short-lived, and the mood seemed to be more stable that day as the initial wave of panic about the stability of the United States bank subsided.
The collapse of SVB Financial, which followed Silvergate to deal a new blow to some crypto companies, however, continues to roll.
At the heart of the debacle this time is Circle, a Blockchain firm that was revealed overnight to have lost part of its reserve fund for its stablecoin, USD Coin (USDC) with SVB.
USDC immediately began to slide from the US dollar peg, and at the time of writing redeemable only $ 0.91, while at one point making Bitcoin worth more than $ 26,000 in terms of USDC on the main exchange Kraken.
“If USDC is only 90% supported, the equilibrium price is not $0.90. The equilibrium price is ZERO,” Cory Klippsten, CEO of Swan Bitcoin, react.
“Everybody has an incentive to redeem their $1 smoke. You don’t want to be the last 10%, with all your money gone.”
Others believe that the situation is manageable and USDC, the second largest stablecoin by market cap, will not fail altogether.
2 / The worst has happened
We now know that 8.2% ($3.3B of $40B) is currently stuck in SVB, but that doesn’t mean the money is gone.
As Adam pointed out, in the same FDIC recovery process, we can expect a 94% payout.
So the damage could be around $198M USD. https://t.co/xvshlKuCmZ
— Ignatius DeFi Research (@DefiIgnas) March 11, 2023
At tweetCircle itself says it has five other banking partners to manage its USDC cash reserves.
Funding rates mimic the FTX atmosphere
Beyond the USDC, nerves among traders are predictable.
Related: USDC Circle instability causes domino effect on DAI, USDD stablecoin
The average funding rate is the most negative since the FTX incident in November 2022, indicating a strong belief that further losses are still possible for Bitcoin.
However, analyzing the implications, the commentator Tedtalksmacro stated that the overwhelming bearish bias could provide fuel for a classic “short squeeze” higher in BTC/USD.
“The market remains very short here, still. And it could provide fuel for BTC to test at least 21.4k in the short term,” part of the tweet read.
“Tedtalksmacro added that the remote has been “well done” based on Bitcoin’s bounce from weeks below the $20,000 mark.
Other popular market participants like to return to the downside in the short term.
“Amidst the current frenzy, Bitcoin is holding up well. I expect another drop into the interim support zone around $19,200,” Crypto Tony toward his followers.
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