The past few days have been turbulent for the cryptocurrency market, with Bitcoin prices dropping below the $20,000 mark due to news of problems at American banks. The market has also been unsettled by the recent developments surrounding stablecoin USD Coin (USDC). However, the market is now showing signs of recovery, with Bitcoin prices rising by 2% after $200 million worth of liquidations.
In this article, we will examine the events that led to the market panic and subsequent liquidations. We will also explore the role of stablecoins in the market and their impact on the price of Bitcoin.
The Role of Silicon Valley Bank
Silicon Valley Bank is a major topic of discussion in the cryptocurrency community, with companies such as Circle and BlockFi having significant investments in the bank. However, recent events have cast a shadow over the bank’s stability, leading to a widespread panic in the market.
The Liquidation of Bitcoin Futures
The price movements triggered $40 million worth of liquidations in Bitcoin futures. On March 9th, a total of $200 million in futures were liquidated across the entire cryptocurrency market. This simply means that derivatives traders who speculated on a higher price of Bitcoin are now facing losses.
Stablecoins and Their Impact on the Market
Stablecoins are digital currencies that are designed to maintain a stable value. They are often pegged to traditional currencies such as the US dollar. In the case of the recent market panic, stablecoins played a significant role.
USD Coin, which is a project of Circle in collaboration with Coinbase, has been at the center of the current turmoil. Coinbase has suspended the direct path from USDC to real dollars, causing concern among traders. In the past 24 hours, the trading volume of USD Coin on the largest exchanges according to CoinMarketCap has been more than $25 billion.
The largest competitor of USD Coin is Tether, which has a larger circulation (over $72 billion) and a much higher trading volume worldwide. Tether has also experienced a surge in demand due to the market panic. However, the demand for Tether is so high at the moment that its value has risen above that of the US dollar. This is not expected to last, as Tether’s value is expected to fall back to its normal level soon.
The recent panic in the cryptocurrency market is a reminder of the volatility of the market and the importance of stablecoins. As more companies and individuals invest in cryptocurrencies, stablecoins are likely to play a bigger role in the market. It is important to keep a close eye on developments in the market and stay informed about the latest news and trends.