ALSO: CoinDesk’s Shaurya Malwa writes that higher-than-usual market volatility affected bulls and bears alike as crypto futures racked up $300 million in liquidations over a 24-hour period earlier this week.
Good morning. Here’s what’s happening:
Prices: Bitcoin and ether are coming off a multi-day rally, slipping into the red.
Insights: Bitcoin and ether volatility stunned bears and bulls alike over a 24-hour period earlier this week. Was the price movement the result of the bank crisis?
Bitcoin Dips Below $25K as Market Debates Liquidity
Bitcoin and ether began the Asia trading day in the red, with bitcoin declining 2.5% to $24,330 and ether declining 3.7% to $1,649.
Liquidity is on everyone’s mind, especially in the face of record drawdowns from the Treasury General Account during the Covid era, and more after the failure of Silicon Valley Bank.
Most recently, something appears to have spooked the Federal Deposit Insurance Corp as it replaced $40 billion in funds it took from the TGA, initially earmarked to help ease market disruptions from the closure of SVB.
As Reuters recently reported, over the past week the TGA was down nearly $100 billion before the FDIC returned its $40 billion.
“The TGA was drawn down all during 2023 and that helped markets in general including bitcoin. But as of late in the last five days, the TGA had nothing to do with bitcoins’ outperformance,” Mark Connors, head of research at 3iQ, told CoinDesk in a note. “There’s a little more confidence that the bitcoin thesis is not just intact, but it’s been validated at a level that we’ve never seen before.”
Connors says this is a question of confidence for the Fed.
“When you see the Fed creating a bubble, popping the bubble and then not knowing which game to play by inflation, or stabilize financial markets, it does not instil confidence,” he continued.
A bigger question at hand is rate volatility, according to Connors, and the market hates uncertainty.
“The reason that’s important is because rates are used to price every asset on the planet,” he said. “And when you have uncertainty on interest rates, you have uncertainty on what everything is worth.”
The next Federal Open Market Committee meeting is scheduled to take place March 21-22.
This article was originally published by CoinDesk.