MARKET

Bull market is back? Mainstream cryptocurrencies are all rising, positive news summarized for you to know

share
Bull market is back? Mainstream cryptocurrencies are all rising, positive news summarized for you to know

Over the past week, three banks have collapsed one after another, leading to significant volatility in the global financial markets. However, amidst the sharp decline in bank stocks, the cryptocurrency market has shown independent performance. Major cryptocurrencies experienced gains of around 10% in the past day, with Bitcoin surging nearly 20% and reaching the $24,000 mark. What positive news has emerged in the market that has brought such a bullish trend to the cryptocurrency market?

Cryptocurrency Market Surge: What Good News is Driving the Market?

Due to the bankruptcy of Silicon Valley Bank and the severe unpegging of USDC, the price of Bitcoin fell below $20,000 last Friday. However, Bitcoin has quickly surged towards $25,000, leading the community to question what is driving the price increase. The following points are considered important bullish news in the recent market:

1. Federal Reserve (FED) Introduces Market Support Plan BTFP

As the bankruptcy of Silicon Valley Bank escalated, the three major U.S. regulatory agencies issued a joint statement yesterday to safeguard the security of all depositors' funds to calm the situation.

The subsequent release of the Bank Term Funding Program (BTFP) by the FED is crucial. Due to the bond liquidity issues that led to the bank's collapse, the bonds purchased in the past significantly devalued. To prevent similar problems from causing broader impacts, the FED provided the necessary liquidity for U.S. deposit institutions.

Banks can use eligible securities as collateral to borrow from Federal Reserve Banks at face value, alleviating concerns about Held-to-Maturity (HTM) bond positions being forced to sell at a loss due to deposit outflows, which could lead to capital inadequacy.

After the announcement of the FED's market support plan, it essentially injected a shot of confidence into the market, helping to alleviate bank runs and reduce short-term risks in the banking system.

However, whether the injection of funds through the BTFP plan constitutes a form of quantitative easing (QE) remains to be observed, depending on the demand from banking institutions for BTFP.

Related Reading: Paxos, Coinbase still have cash at Signature, FED releases market support plan BTFP: Depositors need not worry about bank runs

2. Slowdown in Rate Hike Pace

The rapid pace of interest rate hikes over the past year is beginning to show its impact on the banking system. To ease the current pressures on banks, the Federal Reserve's rate hike seems to have to slow down.

According to data from FedWatch, prior to the Silicon Valley Bank's collapse, the probability of a two-notch rate hike at the next FOMC meeting on 3/23 was about 40%. However, this probability has now dropped to 0%, while the probability of a one-notch hike has risen to 76%, with a 24% chance of maintaining the current rate.

For the speculatively sensitive market regarding rate adjustments, maintaining or even lowering rates would be preferable, so the slowdown in rate hikes is relatively good news for the market.

However, in yesterday's podcast discussion, it was still believed that the overall direction of the rate hike policy is unlikely to change. The U.S. government is only using existing means to help people access deposits but will not change the goal of combating inflation.

3. Resolution of USDC Crisis

Due to Circle, the issuer of USDC, having $3.3 billion stuck in Silicon Valley Bank, users panicked and sold off USDC, causing USDC to briefly unpeg below $0.9, affecting stablecoins like DAI and FRAX.

However, with the release of a solution by U.S. regulatory agencies, the current price of USDC has returned to around $1, resolving the crisis related to stablecoins.

Related Articles: USDC unpegged, $2.7 billion destroyed! Circle: Silicon Valley Bank reserves only account for less than 25%; USDT up by 1%; Binance suspends exchanges

However, according to data from Dune Analytics here, since the unpegging of USDC, the circulating supply has continuously decreased due to destruction, with over about $3.73 billion destroyed in the past 3 days.

4. Binance Boosts Confidence, Massive Investment of Nearly $1 Billion

Amid the turmoil of stablecoins and banks, Binance CEO CZ decided yesterday to convert the remaining $1 billion from the Industry Recovery Initiative funds into cryptocurrencies, including Bitcoin, Ethereum, and BNB.

This substantial amount, approximately $980 million in BUSD, was transferred to Binance yesterday. Such a massive buying spree is bound to drive prices up.

Related Reading: Stablecoin Panic! Binance Founder CZ: The remaining $1 billion fund will buy Bitcoin, Ethereum, and BNB

5. Return to Basics, Renewed Discussion on Distrust of Centralized Institutions

With the alleviation of USDC concerns and the crises faced by many banks, the narrative in the crypto market has returned to the classic mode of "banks are not trustworthy, money flows into Bitcoin." Note: Bitcoin originated from the distrust of centralized institutions during the financial crisis.

Investors are now proclaiming on Twitter: "FDIC saved Bitcoin." With the related emotions escalating, the narrative-driven crypto market is gradually on the rise.

Related Reading: Bankruptcy concept coin "Bitcoin" skyrockets overnight to $24K, "FDIC saved Bitcoin"

The above points summarize the reasons for the recent surge in the cryptocurrency market. The cryptocurrency market is volatile, so investors, please manage your risks.