Total market capitalization to drop amid Silvergate crisis
Press Release

Total market capitalization to drop amid Silvergate crisis

written by John Murphy | March 7, 2023

The total market capitalization i.e. the combined value of all cryptocurrencies in circulation has dropped. The drop could be a result of the solvency of Silvergate Bank. This concern led to a rapid sell-off of the cryptocurrencies which include Bitcoin, Ethereum, and other altcoins. ultimately this hints that total market capitalization to drop amid Silvergate crisis.

After experiencing a calm February and gaining 4% total market cap the cryptocurrencies are yet to face another crucial month in March. As regulatory pressures seem to have a greater impact on the volatility in the days to come.

The crypto bulls seemed to miss the technicality behind the last 48 days of rise in total crypto market capitalization. However the trends keep shifting, on March 2nd there was a 6.3% price correction that caused a break below the ascending channel support level.

The total market capitalization dropped amid the Silvergate crisis. The market cap of crypto ruptured after a crypto bank, the Silvergate bank, stocks collapsed at the New York Stock Exchange on 2 March. Silvergate announced further losses as it could lead to a spiraling situation in the market.

SilvegateBank was one of the most crypto-involved banks, it had its branches submerged deeper into some of the most significant crypto exchanges in the market. It provides financial infrastructure services to these exchanges as well as mining companies and institutional investors. as a result of the collapse the investors were incentivized to find alternatives and or seek methods to reduce their exposure in the crypto market.

contrary to the previous estimate, the bankrupt FTX exchange revealed on March 2 a huge shortfall in its digital assets and fiat stocks. However later the FTX engineer pleaded guilty to fraud and conspiracies.

With less than $700 million assets in liquid assets at FTX US, billions of funds of FTX users are missing. there is almost $8.6 million deficit in FTX while in FTX US there is a $116 million deficit.

The 4% weekly decline was observed due to the loss in the price of bitcoin and Ether, which is 4.5% and 4.8% respectively. There was only 6 crypto that was performing well thus far.

Despite the recent price correction, the demand for leverage appears to be stable.

Inverse swaps or perpetual contracts have a built-in fee that is charged every 8 hours. This has helped in avoiding risks.

the positive funding rates indicated buyers are asking to trade more money. While if it’s negative that indicates a need for more money to trade it with.

The put/call ratio reflects traders’ optimism

Traders can find out if the traders are being bullish or bearish merely by looking at the number of calls (buy) and put (sell) options. Call options are for the bullish ones while the Put options are for the bearish people.

the ratio of put options to call options is 0.70 which generally indicates that there are more bulls in the industry. Whereas a ratio of 1.40indicated that there are more put options or bears

Since February 25th, more investors are buying call options instead of put options for Bitcoin. This means they are more bullish and believe that Bitcoin’s price will go up.

On March 2nd, Bitcoin’s price dropped to $22,000 briefly, but it quickly rebounded. Overall, there are more investors who are neutral to bullish and prefer buying call options unlike those who are bearish and prefer buying put options.

the crypto market showed resilience to the drop in prices according to the derivatives market. Despite the failed ascending channel, Bitcoin may not expect any additional price corrections. The 4% drop in the market due to the collapse of Silvergate bank does not seem to have a longer-lasting impact on the market.