“Is Bitcoin Reacting To The Chaos Or Is Bitcoin Causing The Chaos?” Max Keiser
Updated: 3-13-2023: Banking Crisis Won’t Kill Crypto Banking Despite Short-Term Pain. “Is Bitcoin Reacting To The Chaos Or Is Bitcoin Causing The Chaos?” Max Keiser
From alternative banks to on-chain banking, crypto banking still has plenty of options, experts say.
The crypto ecosystem was built on the belief that no one entity, meaning a bank, should be in charge of one individual’s finances.
However, until that becomes a reality, traditional banking will likely have to serve as a bridge between centralized finance (CeFi) and decentralized finance (DeFi).
Thus, the shutdown of Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank will certainly cause headaches for the industry in the short term as many crypto companies search for new banking partners, uncertain if larger entities will even want to touch crypto companies anytime soon.
“For now it’s not clear what new financial institutions will partner with these crypto companies in the wake of Silvergate, SVB and now Signature,” said Ilya Volkov, CEO of and co-founder of YouHodler, a Swiss-based international fintech platform providing a variety of Web3 crypto and fiat service.
“The industry is currently running out of options and that needs to be addressed soon to prevent further problems,” Volkov added, noting that it will cause some fear-based reactions from the investors.
In the long run, however, this contagion shouldn’t hurt the crypto industry because there will likely be other smaller banks that could bridge the gap.
“Crypto liquidity is likely to take a hit in the short term but this is an opportunity for new innovative challenger banks to step up and take the place of SVB, Silvergate and Signature,” said Andrei Grachev, managing partner at digital asset market maker DWF Labs.
On-chain Banking And Other Adaptations
Another novel idea, to which only crypto can help provide a solution, is on-chain banking, according to Brent Xu, CEO and founder of cross-chain DeFi protocol Umee.
“Future banking should become on-chain. That means that banks are going to start to more resemble blockchains as opposed to purely centralized entities,” Xu said. Such technology will allow the banks to have “on-chain metrics related to their exposure to AFS (available for sale) securities like Treasurys and to allow better on-chain metrics for their cash management activities”, he added.
Regardless of the outcome, every bear cycle in crypto has experienced such conundrums and came out stronger, Xu said.
“Having been in this industry for as long as I have, this news doesn’t surprise me to the point where we have become numb to the effects. It is to be expected,” he said.
This won’t mean the end of crypto banking, he added. Rather, institutions that don’t adapt to new technology will be left behind.
“The crypto industry has gone through banking shifts like this every cycle. We won’t see a shortfall of banks. More so, we will see a shortfall of legacy banks that support this tech,” Xu added.
SVB Crisis: Here Are The Crypto Firms Denying Exposure To Troubled US Banks
Some of the biggest firms in crypto have denied exposure to any of the failed banks in the United States.
Amid the ongoing United States banking crisis, several major cryptocurrency firms have denied exposure to dissolved U.S. banks like Silicon Valley Bank (SVB).
As potential implications of the SVB crisis for the crypto market continue to unfold, Cointelegraph highlighted several major crypto firms that have declared to be unaffected by the issues so far.
Tether, the operator of the eponymous U.S. dollar-pegged stablecoin, Tether (USDT), was one of the first companies to deny exposure to SVB and other troubled U.S. banks as of mid-March.
On March 12, Tether chief technology officer Paolo Ardoino took to Twitter to announce that the stablecoin company has zero exposure to Signature Bank. The tweet came soon after Signature officially shut down operations the same day.
Ardoino previously said that Tether had no exposure to SVB on March 10. The chief technology officer posted a similar tweet about Silvergate on March 2, declaring that Tether did not have “any exposure” to the bank.
Tether’s USDT is the largest stablecoin by market capitalization, with a market value of $73 billion at the time of writing.
Its biggest rival, USD Coin, briefly lost its 1:1 peg with the U.S. dollar after its issuer, Circle, could not withdraw $3.3 billion in reserves from SVB.
Crypto.com, Gemini, BitMEX
Kris Marszalek, CEO of major cryptocurrency exchange Crypto.com, provided similar statements on the company being unaffected by the ongoing issues in U.S. banking.
In subsequent tweets on March 10 and March 12, Marszalek declared that Crypto.com had zero exposure to Signature, Silvergate and SVB.
— Kris | Crypto.com (@kris) March 13, 2023
Other major exchanges, including Gemini and BitMEX, have also denied any exposure to the dissolved U.S. banks.
Despite having a partnership with Signature, Winklevoss brothers-founded Gemini exchange has zero customer funds and zero Gemini dollar (GUSD) funds held at the bank, the firm announced on March 13.
Gemini emphasized that all customer U.S. dollars and its GUSD reserves are held at banks like JPMorgan, Goldman Sachs and State Street Bank.
2/ All Gemini customer U.S. dollars are held at JPMorgan, Goldman Sachs, and State Street Bank.
— Gemini (@Gemini) March 13, 2023
BitMEX exchange also took to Twitter on March 13 to announce that the company had “no direct exposure” to Silvergate, SVB or Signature. “All user funds continue to be safe and accessible 24/7/365,” BitMEX added.
Exchanges like Binance and Kraken have partly denied exposure to the dissolved banks, with Binance CEO Changpeng Zhao stating that Binance does not have assets at Silvergate, and former Kraken CEO Jesse Powell also denying exposure to SVB.
Bitcoin mining firm Argo Blockchain issued a statement on March 13, declaring that the company has no direct or indirect exposure to SVB and Silvergate Bank.
However, the company said that one of Argo’s subsidiaries holds a “portion of its operating funds in cash deposits” at Signature.
“These deposits are secure and are not at risk,” Argo noted, citing a decision by the U.S. Treasury and Federal Deposit Insurance Corporation to rescue customer deposits at the bank.
Animoca Brands, Hong Kong-based game software company and prominent investor in non-fungible token and gaming space, claimed that it had no assets at SVB and Silvergate as well.
On March 11, Animoca co-founder and chairman Yat Siu said that the company “does not bank with either Silicon Valley Bank or Silvergate.”
A spokesperson for Animoca also told Cointelegraph that the firm has “never had a banking relationship with Signature.”
A number of other firms, including Abra and Alchemy Pay, have partly denied exposure to the troubled U.S. banks, stating that they had no assets at SBV and Silvergate.
Some companies, like crypto custodian BitGo, declared it holds no assets at SVB while being “not impacted” by issues at Silvergate, USDC and Signature Bank.
SVB And Silvergate Are Out, But Major Banks Are Still Backing Crypto Firms
While two of the crypto industry’s biggest backers have fallen, crypto firms are not at a loss with a number of alternative and crypto-friendly support options available.
Over the last week, the collapse of three of the largest banks backing the crypto scene — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — has many industry pundits wondering how United States-based crypto companies will fare after such losses.
While it has been said that there is “nobody left to bank crypto companies,” some in the crypto space have already highlighted the remaining options.
One Twitter user called out another after they said there is “basically no one left to bank crypto companies in the U.S.” by listing off some banks with crypto clients.
This is false. United Texas Bank, Western Alliance Bank, JP Morgan Chase, and Bank of New York Mellon all have crypto businesses as customers, and there are probably more. https://t.co/Q27bkzq2n8
— yuga.eth (@yugacohler) March 13, 2023
Along with that rebuttal, various users began to compile lists of banks that still could be long-term options for smaller crypto operations.
Although the situation surrounding banks, crypto and stablecoins is fragile, there remain mainstream options for those working in the space.
Bank of New York (BNY) Mellon
On Oct. 11, 2022, BNY Mellon announced the official launch of its digital custody platform for institutional clients to hold Bitcoin (BTC) and Ether BNY Mellon reports having $43 trillion in assets under custody, though it has not disclosed how much of that total includes BTC and ETH holdings. In March 2022, Circle chose BNY Mellon as one of its custodians for its USD Coin reserves.
On Feb. 9, during a cryptocurrency panel at Afore Consulting’s 7th Annual FinTech and Regulation Conference, the bank’s head of advanced solutions, Michael Demissie, said digital assets are “here to stay.”
In light of the recent events involving SVB, Circle also announced it was working on “expanded relationships” with existing partners, including BNY Mellon.
JPMorgan launched its Onyx Digital Assets platform back in November 2020, which has since processed over $430 billion in transactions.
Recently, the firm began exploring “deposit tokens” as an alternative to privately issued stablecoins and central bank digital currencies on commercial bank blockchains.
Deposit tokens, in theory, can exist on both public and permissioned blockchain environments for uses, including peer-to-peer payments, support smart contract programmability or serve as cash collateral.
JPMorgan has also piloted blockchain usage, including collateral settlement, repurchase agreement trades and cross-border transactions.
Cross River, a U.S.-based financial services firm, offers crypto solutions to fintech companies. It has served clients both inside and outside of the crypto space, including cryptocurrency exchange Coinbase and financial services giants Visa and Mastercard.
On March 13, days after the USDC depegging, Circle announced Cross River as its new commercial banking partner to produce and redeem USDC.
The British bank offers a custody solution for BTC and ETH wallets and has served the likes of Coinbase and Bitstamp since it was approved to provide digital services by the United Kingdom’s Financial Conduct Authority in late January 2020.
After the SVB fallout, Oliver von Landsberg-Sadie, CEO of BCB Group, tweeted that the group has no ties with SVB or Signature and no “material amount of its own” in USDC.
1/ .@BCBcrypto holds no material amount of its own funds in USDC, however BCB’s services relating to USDC include trading and custody through BCB Prime Services (Switzerland).
— Oliver von Landsberg-Sadie (@OliverBCB) March 11, 2023
The bank offers instant payments for business-to-business transactions and instant settlement for cryptocurrency trading firms, exchanges, liquidity providers, over-the-counter desks, market makers and institutional investors on its “TassatPay” platform.
TasatPay has processed over $1 trillion worth of transactions since it launched in 2019, including $150 billion alone in January, according to recent reports.
Shortly after the fall of the former cryptocurrency exchange FTX, Customers Bank announced that it had no ties with FTX and that its “CBIT related deposit balances” are stable at $1.85 billion. It claimed to have over $20 billion in assets.
The Singaporean bank offers its own custody platform, DBS Digital Custody, to customers who can purchase BTC, ETH, XRP, Bitcoin Cash from the DBS Digital Custody exchange.
DBS also offers a separate financial tool, which it calls the DBS Digital Exchange and is backed by the bank. DBS DDEx operates “members-only exchanges,” through which users have access to digital assets, including security tokens and cryptocurrencies.
Customers banking with OCBC cannot directly purchase crypto assets from the platform. However, OCBC bank accounts can be connected to a licensed trading platform that it is partnered with, such as eToro, to buy digital assets.
Mercury Bank boasts in its offering of banking services for Web3 startups, decentralized autonomous organizations and funds. However, it explicitly states it cannot work with “money service businesses” or exchanges.
While cryptocurrencies themselves cannot be held in a Mercury account, in its FAQs section, it says it does not “express restrictions” on buying crypto through a Mercury account.
The company has been active on Twitter since the string of U.S. banks went under, saying it is ready to onboard clients affected by the incident.
Our onboarding teams are working hard to make sure your applications are getting approved this weekend.
If you’re looking to submit an application, a priority signup link is below. https://t.co/NqOuuDgCt4
— Mercury (@mercury) March 11, 2023
Another crypto-friendly bank, Axos began offering its commercial banking clients access to TassatPay back in May 2022. TassatPay is a digital payments alternative on a private and permissioned blockchain-based platform that allows for around-the-clock real-time payment capabilities, approved by a primary bank regulator. It has processed over $400 billion in transactions to date.
Axos also offers access to multiple crypto-related exchange-traded funds (ETFs), including Bitwise 10 Crypto Index Fund (BITW), Bitwise Crypto Industry Innovation ETF (BITQ), ProShares Bitcoin Strategy ETF (BITO) and the ProShares Short Bitcoin Strategy ETF (BITI), among others.
According to a recent Reuters report, banks in Switzerland are seeing an influx of interest from American crypto companies after the recent events.
Crypto-focused SEBA Bank said it has experienced a “pronounced uptick” in traffic on its website by visitors from the United States.
Arab Bank, based in Switzerland, reported an increase in U.S. firms, mostly in the crypto space, looking to open accounts after Silveragte doubts mounted. According to the report, 80% had been Silvergate customers.
The Swiss bank Sygnum is also a crypto-friendly bank with self-made claims of being “the world’s first digital asset bank.” Although, it has a policy not to take on clients from the U.S. due to unclear regulations.
More Banks Serving Crypto Firms
While this list of options available to crypto firms is not exhaustive, it highlights that there could still be a light at the end of the tunnel.
Other banks that could be of potential interest to the crypto industry include Jewel, Series, State Street Bank, Goldman, Capital Union, First Digital and others.
Jake Chervinsky, chief policy officer at the Blockchain Association, tweeted that with the fall of SVB, Silvergate and Signature, there is now a huge gap in the space for “crypto-friendly banking.”
The closures of Silvergate, SVB, and Signature create a huge gap in the market for crypto-friendly banking.
There are many banks that can seize this opportunity without taking on the same risks as these three.
The question is if banking regulators will try to stand in the way.
— Jake Chervinsky (@jchervinsky) March 12, 2023
He continued to say that, given that crypto firms will need new accounts, this is an “opportunity” for banks to seize but without the same risks as the three that failed.
Banking Crisis In U.S. Likely To Push Bitcoin Firms Offshore
Switzerland, Lichtenstein and island jurisdictions are among the potential benefactors of the trend.
U.S. crypto firms are looking for bank accounts offshore following the collapse of three digital assets-friendly financial institutions last week.
Sygnum in Switzerland and Bank Frick in Lichtenstein told CoinDesk they have seen an increase in requests to open accounts in the past few days from various jurisdictions – including the U.S.
Meanwhile, Swiss bank SEBA said it has already started onboarding crypto clients that have recently shown interest.
On the retail side, Gibraltar’s Xapo Bank has also seen increased demand for new accounts in the past few days and is adding GBP payment services with USDC options likely starting later this week.
Industry sources have also pointed to FV Bank in Puerto Rico, Jewel Bank in Bermuda, and Tether and FTX-tied Deltec in the Bahamas, as options for U.S. dollar-based banking.
A list sent out to some companies in the Digital Currency Group umbrella (which includes CoinDesk) also identified EQIBank in Dominica. These banks didn’t respond to CoinDesk’s request for comment.
Last week, three of crypto’s preferred banks in the U.S. became effectively defunct. Silvergate Bank (SI) was liquidated, whereas Silicon Valley Bank (SVB) and Signature Bank (SBNY) were shut down by regulators.
While an interim solution for Silicon Valley Bank has been set up in the form of a bridge bank to allow customers to use their accounts, in the long-term companies will have to move their funds to other banks.
The Federal Insurance Deposit Corporation (FDIC), which manages the process, typically organizes bridge banks for up to two years, said a spokesperson for the agency. That’s plenty of time for firms to go through the onboarding process of most banks.
Europe And Beyond
Europe’s relative regulatory clarity could prove an asset, particularly as the U.S. lacks a regulatory framework plus the trust of many crypto insiders in U.S. authorities has been shaken.
Reported claims that the closure of Signature Bank was part of a larger campaign against the crypto industry have raised concerns among industry participants.
“There is a very real risk that more crypto companies will move offshore, particularly with regulatory frameworks being proposed in the U.K. and the [European Union],” said Dave Weisberger, CEO and co-founder of algorithmic trading platform CoinRoutes.
Crypto firms will likely look beyond Europe for their banking needs because more jurisdictions are increasingly friendly toward digital assets. “Global crypto companies will definitely be looking at banking options in Europe, Hong Kong and the Middle East,” said Sanjay Raghavan, vice president of Web3 initiatives at real estate investment platform Roofstock onChain.
He pointed to the United Arab Emirates, which is “embracing crypto innovation and has announced plans to launch an economic free zone dedicated to crypto and digital asset companies.”
Some crypto firms were already looking to go overseas or offshore even before the closing of these three banks, said Josh Frank, co-founder and CEO of information platform The Tie.
“Many crypto companies already had multiple on and off-shore banking partners,” he said, noting that U.S. companies will likely prefer Caribbean and European banks first.
SEBA’s Managing Director Yves Longchamp said that interest in the bank’s services has increased in the past few weeks but especially the last few days, “across all segments in the space, from VCs [venture capital firms] to foundations to trading firms and treasuries.”
However, in his view, “it’s no longer reliable” to rely on one banking provider in one jurisdiction anymore, “particularly when recent messaging from the regulating bodies has been less than encouraging.”
The push for overseas banking is a “missed opportunity for the U.S. economy in my view, given it has the best chance of regulating the industry and helping it mature,” said Xapo Bank’s CEO Seamus Rocca.
Regardless of where U.S. crypto companies look for their banking partners, regulatory risk in their home jurisdiction will likely loom large.
The willingness of internationally established banks to do business with U.S. crypto entities at the moment also hangs on the question of what the U.S. regulators will let the companies do for their banking partnerships.
“Many European and Asian banks also have some U.S. presence, which could presumably put them in sight of regulators if they are banking U.S. customers via offshore entities,” Frank said.
Being approved by banks in European countries will likely take longer and be a heavier lift. Only crypto companies that are regulated and have proper compliance and governance will be able to access non-U.S. banks, said Henri Arslanian co-founder and managing partner of Dubai-based Nine Blocks Capital Management.
Longchamp said that “previously, the lack of a clear regulatory framework [for crypto firms] in the U.S. had been a large deterrent” to servicing clients. In the Asia-Pacific region for example, SEBA has always preferred not to “involve more U.S. aspects in a business unnecessarily.”
The bank, which is licensed in both Switzerland and Abu Dhabi, takes measures like “segregated accounts and risk management” to provide its clients “full autonomy over their assets,” Longchamp said.
Meanwhile, Bank Frick said that its reviewing every new onboarding case individually. “We apply and have always applied the same strict standards in the crypto area as in the classic banking business.
If all necessary local [know your customer/anti-money laundering] standards are fulfilled, it is also possible to onboard jurisdictions outside Europe,” Nicolas Marxer, Bank Frick’s head of blockchain banking, told CoinDesk.
Sygnum Bank, for its part, does not onboard U.S. clients, said Martin Burgherr, the bank’s chief clients officer, so the applicants for new bank accounts are likely knocking on the wrong door.
Santander, HSBC, Deutsche Bank, Others Still Willing To Serve Crypto Clients After Banking Failures, DCG Says
Major banks are still willing to work with crypto firms, though they may restrict services, according to messages from DCG viewed by CoinDesk.
Crypto conglomerate Digital Currency Group (DCG) is trying to find new banking partners for portfolio companies following the collapse of Silicon Valley Bank (SVB), Signature Bank (SBNY) and Silvergate Bank, according to a memo viewed by CoinDesk.
Santander (SAN), HSBC (HSBA), Deutsche Bank (DB), BankProv, Bridge Bank, Mercury, Multis and Series Financial are still willing to connect with crypto firms, according to the memo.
DCG’s efforts come after recent bank failures in the U.S., which left a lot of crypto firms and tech startups stranded and hunting for new banking partners.
DCG had also reached out to BlackRock (BK), JPMorgan (JPM) and Bank of America (BA), according to the list included in the memo. DCG is the parent company of CoinDesk.
The memo notes that banks may restrict some services for crypto firms such as brokerage and money market services and the ability to wire money to third parties.
Traditional banks may be willing to set up banking accounts for crypto firms but would place restrictions based on the level of crypto exposure, according to the messages.
Western Alliance and Bridge Bank are still opening accounts for crypto firms, despite the fall in their share prices. DCG had also reached out to international banks including Revolut in the U.K., United Overseas Bank (UOB) in Singapore and Bank Leumi in Israel.
A DCG representative will meet with Senate Banking Committee staff on Wednesday on the fallout from SVB, Signature and Silvergate, according to the memo.
CoinDesk has reached out to DCG, Santander, HSBC, Deutsche Bank, BankProv, Mercury, Multis, Series Financial, BlackRock, JPMorgan, Bank of America, Revolut, UOB and Bank Leumi for comment.
No Crypto Banking Port Has Really Opened Up In This U.S. Storm
As Silvergate, Signature and Silicon Valley banks imploded, crypto customers grabbed assets and ran, but those hoping to land at major U.S. banks have been mostly disappointed.
The biggest U.S. banks haven’t stepped forward to welcome homeless crypto businesses scrambling for banking services after fleeing the wreckage of Silvergate Bank, Signature Bank and Silicon Valley Bank.
CoinDesk asked the top 20 U.S. banks by assets if they were taking on crypto customers, especially those businesses that recently lost their banking homes in the recent carnage. Most of them remained silent on the question.
Some – including JPMorgan Chase (JPM), Citigroup (C), Bank of New York Mellon (BK) and Morgan Stanley (MS) – declined to comment.
Others were open about saying they aren’t comfortable taking on crypto clients.
KeyBank (KEY), a regional lender based in Ohio, is between Silicon Valley and Signature in scale, so around the size of the institutions that crypto clients have been accustomed to using. But a spokeswoman there said the bank is focusing on those that meet its “moderate risk profile.”
“Crypto-focused firms do not fall within this category at this time,” she said.
And Citizens Financial Group (CFG), which is among the larger regional banks, said it doesn’t have “direct credit exposure to crypto/digital asset businesses, and it’s not something we’re looking to get into at this time,” according to a spokesman.
The panic over the collapse of tech-oriented banks – marking two of history’s largest government bank takeovers with Signature and Silicon Valley, plus a more recent cash infusion to First Republic Bank (FRC) from its banking peers – flooded the industry with businesses looking for places to handle their banking.
The banks CoinDesk surveyed represent about $13 trillion in assets – or about 56% of the U.S. banking sector. Not even BNY Mellon – known to handle custody for crypto companies’ assets, such as much of the liquid cash in stablecoin issuer Circle Internet Financial’s reserves – chose to openly address the situation, even though it has expanded its Circle business amid the turmoil.
The largest U.S. bank, JPMorgan, hasn’t slammed the door on crypto companies, but it’s being especially careful with any new customers, according to a person familiar with the situation.
It won’t take on any full-on crypto businesses, but it’s still willing to extend basic banking services to a handful of companies that touch the industry, the person said, such as firms investing in some crypto projects.
JPMorgan has a complicated history with big digital-assets firms. The Wall Street banking giant has been severing business ties with Gemini, as CoinDesk first reported earlier this month, but it still maintains its working relationship with crypto exchange Coinbase (COIN).
And while CEO Jamie Dimon is famously critical of digital assets, his bank has also experimented with high-level use of blockchain technology and its own internal token.
Citigroup is taking a similar approach as its rival at the moment. The doors are still open at Citi for new customers that can clear its due-diligence standards, but it’s not going near hard-core, crypto companies, such as token issuers, a person familiar with its approach said.
Industry insiders have been swapping hints about other banks – such as some foreign institutions that do business in the U.S. – they think might still be open to crypto companies.
A person at one major crypto company said that more than two dozen U.S. banks are still doing business with the industry, even if it’s not openly advertised.
When Circle lost some of its banking partnerships. For instance, it turned to a tiny institution in New Jersey, Cross River Bank, that was known to do business with tech investment firms.
“As long as a crypto company can demonstrate its ability to be a good bank customer, it should be able to be banked,” said Sheila Warren, CEO of the Crypto Council for Innovation.
There’s also a risk that the very act of flagging friendly banks could open them up to questions about their own strengths.
While banks struggle under a rush of customer applications, they are also dealing with their industry’s unsteadiness, with the KBW index’s measure of bank stocks sliding about 22% from the point at which Silvergate began faltering two weeks ago.
So crypto companies have been showing up at the doors of financial institutions that are themselves shaken by what’s been going on.
The banks are also unsure exactly which customers they can offer a hand to without it getting slapped by their regulators.
Whether the volatility or business practices of the crypto sector contributed to the failures of the industry’s favorite banks, the surviving institutions are under directives to be wary of digital assets.
Since the collapse of FTX, leaders of the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency have expressed relief that they had resisted letting cryptocurrencies into the banking system.
In recent months, they have solidified that position by warning the lenders they oversee that those that focus on crypto clients aren’t likely to convince their government supervisors that they are running a safe-and-sound bank.
Most of the banks are taking these statements to heart, and some insiders – such as former House Financial Services Committee Chairman Barney Frank, who is a board member at Signature – have more pointedly accused regulators of gunning for crypto.
When asked if they could provide more clarity on what kind of crypto business exposure might be acceptable at the banks they oversee, spokespeople for the Federal Reserve and FDIC declined to go any further than the statements they have put out in recent months.
Officials from both agencies have been called to a March 29 hearing of Frank’s old House committee to explain what happened with Signature and Silicon Valley.
For customers of those banks, federal authorities blunted some of this month’s panic when the FDIC stepped in to take charge of them and open up its deposit insurance to cover all the normally uninsured customers – a cohort that the bulk of the crypto clients fit into.
Over the weekend, New York Community Bancorp (NYCB) stepped in to take over Signature’s non-crypto deposits, leaving an open question about the $4 billion in deposits still in limbo from its digital-assets business.
And federal officials have continued to try to calm the financial sector. Wally Adeyemo, deputy secretary of the U.S. Treasury Department, told CNBC last week that “deposit flows have stabilized in regional and small banks,” and in some cases they have “modestly reversed.” He credited that to the government’s aggressive move to protect uninsured depositors.
But banks are also seeing how charged up their critics are, such as Sen. Elizabeth Warren (D-Mass.), who hammered former Signature CEO Joseph J. DePaolo in a letter that cited “gross mismanagement that resulted in the bank’s failure.”
She argued that the bank “embraced crypto customers with insufficient safeguards.”
The senator ended her letter with the question, “Why did you fail to adhere to regulators’ warnings about the risks associated with the crypto industry?”
Banks Step Up To Serve Crypto Firms After Signature, Silvergate Blowups
Crypto executives say they have received a positive reception from regional and smaller upstart banks.
Some banks are rolling out the welcome mat for cryptocurrency firms that found themselves in need of banking services after the downfall of two big crypto-friendly lenders, Signature Bank and Silvergate Capital Corp.
As crypto companies have scrambled to establish new bank relationships, industry executives say they have received a positive reception from regional banks such as Customers, based in West Reading, Pa., and Fifth Third Bancorp, based in Cincinnati.
Other crypto firms are moving deposits to smaller upstart banks that tout themselves as digital pioneers, such as New Jersey-based Cross River Bank. Still others are considering taking their banking business offshore.
Meanwhile the biggest banks—such as JPMorgan Chase & Co. and Bank of New York Mellon Corp.—still do business with crypto clients, though they are selective about their client list and what banking services they provide.
A few weeks ago, crypto circles were abuzz with talk that Washington was plotting to kill crypto by cutting off its access to the banking system in what some commentators dubbed “Operation Choke Point 2.0.”
Those fears have now somewhat abated, as banks have stepped up to fill the vacuum created after Silvergate shut down and Signature was placed in receivership with the Federal Deposit Insurance Corp. earlier this month.
“There are dozens of other banks, both onshore and offshore, that are taking advantage of this opportunity,” said Rich Rosenblum, co-founder and president of crypto trading firm GSR.
Banks willing to service crypto firms have been inundated with applications during the past two weeks, crypto executives and bankers said.
After the collapse of Signature, one crypto banker said he enabled his phone’s “do not disturb” mode to get some sleep. He received so many texts in rapid succession that the phone overrode the setting.
Crypto trading firm B2C2 Ltd. is applying for 20 bank accounts across multiple currencies, according to its CEO, Nicola White.
A month ago, B2C2 had about half a dozen applications out, Ms. White said. “We clearly just want to diversify the options that we have,” she said.
The smaller banks that are open to crypto clients have been selective about whom they take on, dragging out the time it takes to establish accounts, bankers and crypto executives say.
One concern from the banks’ side is that they don’t want to have too much exposure to crypto for fear that it will make them a target for regulators.
“We believe that there is a set of U.S. banks that is likely to onboard some of the crypto firms, with a smaller concentration in each bank than previously,” said Michael Shaulov, chief executive of crypto-infrastructure startup Fireblocks Inc.
Fireblocks recently started banking with Fifth Third, people familiar with the matter said. The startup declined to comment on its own bank relationships.
A spokesman for Fifth Third said that, as a matter of corporate policy, the bank doesn’t engage in the business of banking companies that trade or directly handle crypto.
He added: “We recognize the need that all companies, including digital asset companies, have for traditional banking services including payroll, benefits, and accounts payable.”
Attracting deposits from crypto firms could help shore up banks’ balance sheets at a time when a string of failures has shaken confidence in the banking system. But it is a risky gambit.
Bank regulators have raised concerns about lenders’ involvement in crypto while the Securities and Exchange Commission’s aggressive pursuit of crypto firms has alarmed bankers who don’t want to do business with customers in the agency’s crosshairs.
Silvergate and Signature were attractive for crypto trading firms because they ran payment networks that let clients move dollars between each other on a 24/7 basis, making it possible to settle crypto-for-dollar trades outside normal banking hours.
The loss of Silvergate’s SEN network and the threat of losing Signature’s Signet network threw a wrench into the plumbing of crypto markets.
Now, crypto firms have been looking to move to regional banks that offer or are developing similar networks, such as Customers and Phoenix-based Western Alliance Bancorp., people familiar with the matter said.
“Losing SEN and Signet is operationally disruptive, but there are a number of regionals that are also building out these networks and services,” said Bob Rutherford, vice president of operations at FalconX, a digital-assets prime brokerage catering to institutions.
Among the larger banks, JPMorgan continues to provide banking services to crypto clients such as crypto exchange Coinbase Global Inc. BNY Mellon holds cash and Treasurys for stablecoin issuer Circle Internet Financial Ltd.
Other crypto firms have eyed offshore banks such as Puerto Rico’s FV Bank or Capital Union Bank in the Bahamas, industry executives said.
“The closure of Signature and Silvergate has prompted an increase in inquiries from prospective clients,” FV Bank CEO Miles Paschini said. “As a regulated bank and digital asset custodian we can offer firms who meet our strict compliance and risk requirements access to an integrated solution.”
Coinbase executives recently floated the idea of starting a crypto credit union that would help the industry access the financial system, people familiar with the matter said. A Coinbase spokeswoman said she would not comment on “rumor or speculation.”
Some executives cited Cross River as a growing force in crypto banking. After regulators shut Signature on March 12, Circle said it was partnering with the privately held New Jersey bank for automated settlement of its USDC stablecoin, replacing Signet and making Cross River an attractive option for firms using USDC.
A Cross River spokeswoman said the bank is considering accepting deposits only from companies with which it had existing relationships and “blue-chip customers who are integral to the fintech ecosystem.”
Other banks have welcomed new crypto clients, such as Surety Bank, a Florida lender with $220 million in assets that counts a number of cryptocurrency ATM companies as customers.
Crypto firms make up 5% of the company’s revenue. Surety CEO Ryan James said it is important for crypto firms to have access to banks.
“You want to be able to monitor it and have it in the American banking system,” he said. “You don’t want it to go underground.”
Bitcoin Has Benefited From U.S. Dollar Liquidity To Support Banks: Morgan Stanley
Traders on Binance now set the daily price for BTC with the crypto exchange’s share of trading volume reaching 80%, the bank said.
Expectations of increased U.S. dollar liquidity to support the banking sector following a string of forced closures has helped bitcoin (BTC) rally, but other factors are also at play, Morgan Stanley said in a research report Sunday.
Bitcoin, the world’s largest cryptocurrency by market cap, has gained 69% year-to-date.
“Bitcoin trading order book liquidity is at the lowest level in a year, meaning lower volumes can drive larger price moves than before,” analysts led by Sheena Shah wrote.
Traders on Binance, the world’s largest crypto exchange, now set the daily price for bitcoin with its share of trading volume reaching 80%, the report said.
Issuance of the largest stablecoin, tether (USDT), has risen 10% in the last month and 16% this year, but that hasn’t been enough to offset the reduction in other stablecoins such as binance USD (BUSD) and USD coin (USDC), the note said.
A stablecoin is a type of cryptocurrency whose value is pegged to another asset, usually the U.S. dollar. Stablecoins flows are indicative of money entering or leaving the crypto ecosystem.
Morgan Stanley noted that over half of total tether issuance – and 70% of recent issuance – is on the Tron blockchain.
Last week, the U.S. Securities and Exchange Commission sued Tron founder Justin Sun and his companies for fraud. Exchanges Kraken and Binance appear to be the main recipients of the new USDT, the note added.
US Crypto Firms Eye Overseas Move Amid Regulatory Uncertainty
Citing an ongoing regulatory crackdown, crypto companies are considering shifting to more favorable jurisdictions. Jeff Wilser reports.
I recently spoke with U.S. Senator Cynthia Lummis (R-Wyo.), aka “the Crypto Queen,” who wants to pass legislation that will bring regulatory clarity to the cryptocurrency space. She’s frustrated it hasn’t yet happened.
“The failure of the United States Congress to enact policy is pushing the industry to other countries,” she said.
“Europe is ahead of us in terms of its regulatory framework. Australia and the U.K. are getting ahead of us. Switzerland is far ahead of us.”
Other notables have said something similar. The CEO of Ripple, Brad Garlinghouse, told Bloomberg the crypto industry has “already started” moving outside of the U.S. Coinbase, the largest U.S.-based crypto exchange, is considering launching an overseas trading desk, driven by U.S. regulatory uncertainty.
Circle, issuer of the USDC stablecoin, is opening a new office in Paris because, as Circle’s chief strategy officer has said, “France is increasingly seen as a leader in crypto.”
So how serious is this threat? Are U.S. crypto companies really leaving? Or are these just the Web3 boys who cried wolf? (Garlinghouse, after all, threatened to move Ripple’s headquarters from the U.S. in 2020. Ripple is still here.)
“100%. It’s happening. It is absolutely true that people are leaving,” says Jason Gottlieb, a crypto-focused lawyer and partner at Morrison Cohen. Gottlieb says many of these founders are 20-something, without kids, and are able to work from anywhere. “Some of the brightest young entrepreneurs we have are saying, ‘Well, forget it. I’ll go to the Caymans. I’ll go to Portugal. I’ll go to Singapore.’”
I’ve seen some of this. In 2018 and 2019 I lived exclusively abroad, bouncing around digital nomad hubs including Lisbon, Budapest, Chiang Mai and Bali. Each spot had a bustling crypto scene. If you’re young and single and filled with wanderlust, why wouldn’t you want to live in a beachfront villa that costs $600 per month?
(As I wrote in 2018, crypto and digital nomads are a natural fit because “nomads, by definition, are decentralized.”) Then the COVID-19 pandemic accelerated this broader trend of Americans working overseas as the rest of the world discovered the concept of remote work.
And now? The last few weeks of regulatory and banking concerns have added “jet fuel” to crypto looking overseas, says David Nage, portfolio manager at Arca.
“The ability to operate is becoming less and less profitable for many startups in the United States,” he says, adding that many founders are considering Europe, Hong Kong and Latin America as possible alternatives. “No one has left yet,” says Nage. “They are exploring their options.”
So as of now the threat to leave is mostly talk, not action. But there’s a lot of talk. “This comes up constantly,” says Paul Kuveke, the chief operating officer of Mintbase, a non-fungible token (NFT) platform incorporated in the US. Kuveke says the decision of staying or leaving the U.S. is a frequent topic of conversation and is “something we constantly monitor.” One big reason is the legal ambiguity. “We live in a lot of gray areas.
We want answers,” says Kuveke. “Every conversation to do anything involves a consultation with lawyers. It’s expensive.” He adds that confusion about crypto tokens (are they a security?) has spooked founders.
“If you’re going to do a token sale of any kind, the consensus is to not launch in the United States. Go somewhere else,” says Kuveke.
The last month has seen a spate of government-mandated shutdowns of banking services for crypto companies, in what some are calling “Operation Choke Point 2.0” – a reference to an Obama-era program to deny financial services to legal but politically undesirable activities.
Meanwhile, the Securities and Exchange Commission has launched enforcement actions against major players including Coinbase, accusing the platforms of flouting securities laws.
Anxiety over tokens is one reason developers can have incentive to move overseas, says Kristin Smith, CEO of the Blockchain Association. “A lot of developers are compensated in tokens,” says Smith, such as those who contribute to a decentralized autonomous organization (DAO).
Smith cites a report from Electric Capital, a VC firm, titled “U.S. Share of Web3 Developers Is Shrinking.” It says that “global Web3 software development activity has grown more outside the U.S., threatening the U.S.’s preeminence in finance and technology.”
As my colleague Emily Parker has compellingly argued, crypto leaving the U.S. would impact more than just crypto. Think about the economic impact.
“If you have a gigantic office building stuffed with tech workers in New York City, all those people are going to eat lunch in sandwich shops across the street,” says Gottlieb. “Now they’re eating Ban Mian from the streets of Singapore.”
Nage estimates that $3 billion of crypto wages in the U.S. translates to over $750 million in taxes, and “there are definitely going to be countries that are welcome to that tax revenue.”
Smith even considers the growth of Web3 to be important to national security because “the next generation of the internet is going to be built on top of crypto networks,” and “we want to make sure the U.S. is leading that.”
“It’s happening. It is absolutely true that people are leaving.”
For Nexo, a crypto lending platform, leaving the U.S. was not just theoretical. “We had gotten to the point where retaining [U.S.] customers actually created difficulties and costs which didn’t match the expected revenue,” says Antoni Trenchev, Nexo’s co-founder and managing partner.
“On the engineering side, certain products couldn’t be offered in the same way [in the U.S.] so we had to rework the platform,” he says, which increased their engineering costs.
Ultimately the situation was “not viable,” so Nexo planned an orderly 18-month withdrawal. (It’s true that Nexo was issued cease-and-desist letters from several states; Trenchev says “that really caught us by surprise” because at that point they were already conducting a phased withdrawal.)
Trenchev has no regrets. Nexo has replaced the market share it lost in the U.S. with growth in the Middle East, North Africa and Southeast Asia, he says.
Nexo is setting up its new headquarters in Dubai, which Trenchev describes as having clear and friendly crypto regulations and a welcoming atmosphere.
“You have a lot of expats moving here,” says Trenchev, who adds that 800 crypto companies are “setting up shop” in the United Arab Emirates, which “creates an ecosystem of professionals and people you can hire.” Trenchev was particularly impressed by Dubai’s “Zero Problem policy” – a philosophy that businesses should face zero problems when they do business.
For him, the perks of “zero problems” have included clear regulations, top-tier internet, banks that welcome crypto clients and “food that only takes 15 minutes to get delivered.”
Others could soon be joining him. Smith says that she frequently hears joking comments from members of the Blockchain Association such as, “I guess we’re moving to Dubai!”
Some of that could be real, and some of that could be purely in jest. For many, this is similar to when Donald Trump won the presidency in 2016 and many Democrats talked about moving north to Canada.
Most stayed put, however. It’s easy to joke about moving to Montreal but harder to actually do it, which is something many crypto companies are discovering.
“The United States, overall, has the best infrastructure and support for small businesses in general,” says Kuveke, who has found it easier to do banking in the U.S. than Portugal, where he says the banks are “mind-bogglingly terrible.”
And moving to another country is “not a casual process,” says Kuveke, because it involves a gauntlet of paperwork and approvals and is “many months of work.” As of now his company, Mintbase, plans to remain in the United States.
Marshall Hayner, the CEO of Metallicus, a digital asset banking network, also decided to remain in the U.S. One reason is the simple fact that he enjoys living in the United States. “I love it here,” says Hayner.
But the motives are not just sentimental. “20% of the crypto market is based in the U.S.,” says Hayner, and he has little interest in abandoning that lucrative customer base.
He also thinks it’s important to be in the U.S. for a company to have legitimacy. “If you’re not part of the U.S. market, you just can’t be that big in the world of technology, right? You just can’t.”
“We’re at this critical moment. We really need to get the tone of government to change.”
Then there’s the possibility that in the future, if and when the U.S. passes clear regulation, the other international standards will eventually follow suit.
“When it comes to regulation and policy around financial services, the gold standard tends to be the U.S. and Europe. And then the other countries follow,” says Hayner.
So his logic is that if the U.S. ultimately issues guidelines that shape the global framework, why ditch the U.S. (and its wealthy customers) now just for a bit of corner cutting?
Kuveke has the same approach. “The U.S. will always take the lead on this stuff,” he says. “There’s not another country in my mind that will come out with regulation that everyone else will adopt.”
Kuveke clarifies that this is a long-term analysis – no one knows when the U.S. will take action – and that others in the space might not share his optimism because “most startups and small businesses don’t have the luxury of thinking on a 5-year or 10-year time horizon.”
This overall approach – swallow the bitter medicine of U.S. compliance, hope for better in the future – squares with what Preston Byrne, the tech and crypto-focused partner at Brown Rudnick, sees from his clients.
“Most of my American clients want to comply with American law,” says Byrne. He adds that they are taking a “harder approach towards compliance, even if it’s going to slow them down in the beginning.”
All that said, it’s possible that even if companies do not completely “leave” the U.S., in a more subtle manner the bumpy regulatory environment could leave the nation worse off.
“We see less growth of new products and services,” says the Blockchain Association’s Smith. She points to Coinbase as an example, saying the company has effectively said, “Maybe we need to focus on our derivatives offerings overseas.”
On a more macro level, Byrne says that because of the deep coffers of venture capital in Silicon Valley and New York, “the United States has sucked all of the oxygen out of the room, from a global point of view.”
But if the U.S. is about to get “kneecapped by their own regulators,” then that oxygen will flow to other parts of the world.
Smith doesn’t see an exodus as inevitable. “We’re at this critical moment. We really need to get the tone of government to change,” she says.
“We need to spread the fact that this is still a relatively nascent technology but there’s potential, and we want the United States to lead the innovation.” Ultimately, she thinks that “all is not lost. We can still turn this around.”
Crypto Industry Defies Strife As ETP Debuts Pick Up, Flows Rise
* Six Products Launched This Month, Most Since September 2022
* Crypto ETPs See About $182 Million In Inflows Last Week: BI
Exchange-traded products focused on digital tokens are launching at the fastest pace since before the collapse of FTX.
The new funds arrive as investors pour money into crypto products amid turmoil in the banking industry. But they also come as the crypto industry is being assailed by a number of regulatory enforcements and actions looking to clamp down on fraud and market manipulation.
On Monday, cryptocurrency exchange Binance Holdings Ltd. was sued by the US Commodity Futures Trading Commission for allegedly breaking derivatives rules.
“One of the most common reasons for crypto that advocates have always said is that it’s an alternative to the traditional financial system,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “So in the midst of an environment in which it’s front-page news every day that there are issues in the US banking industry, I think it’s viewed as an opportunity to tout an alternative.”
Crypto fund provider CoinShares launched two physically backed exchange-traded products in Europe on Monday, while an investment product tied to Bitcoin from Bitwise started trading in the US last week.
That’s all on top of three new crypto ETPs that debuted in Europe from issuer Global X earlier this month.
That’s the greatest number of product debuts in one month since September, when there were seven launches, before the implosion of the once-vaunted FTX empire, which crypto investors have been attempting to move beyond.
The overall universe of funds is attracting investor money, too. All in all, cryptocurrency ETPs saw about $182 million in inflows for the week ending March 24, the best weekly showing since May 2022, according to data compiled by Bloomberg Intelligence.
The industry is likely betting that there’s still a lot of demand for crypto products even though prices were volatile last year, says Todd Sohn, ETF strategist at Strategas Securities.
“There’s still some demand out there for easy, transparent access” to alternatives like crypto, Sohn says.
Bitcoin and its brethren were staging somewhat of a comeback this year, as the financials sector sold off amid a banking crisis that buoyed the return of original narratives surrounding Bitcoin’s genesis, including that the digital asset’s independence from the traditional financial system could make it immune to its stresses.
But the rally was derailed Monday after the Binance lawsuit. Bitcoin fell as much as 4.5% on the news.
In the US, ETFs focused on digital assets remain the best performing for the year thanks to the rally in crypto prices, including a roughly 63% year-to-date run for Bitcoin.
The Valkyrie Bitcoin Miners ETF (ticker WGMI) is up more than 90% in 2023, while the Vaneck Digital Assets Mining ETF (DAM) and the VanEck Digital Transformation ETF (DAPP) round out the top three spots with returns of 75% and 59%, respectively.
To be sure, funds can take a long time to see the light of day between filing and launch, and timing anything perfectly is near impossible, says Bloomberg Intelligence’s Athanasios Psarofagis.
Plus, crypto firms, given the ethos of truly believing in the asset class, means they’re always “all in.”
“Also, as backwards as it may sound, it’s not a bad idea to launch after a bad run,” he says, adding that your performance looks great since inception if the market comes back because you launched at the bottom.
“So it’s like, ‘it can’t get any worse, let’s launch now,’” Psarofagis says.
Adoption And Nerves — Crypto Pumps Amid Banking Crisis
Despite four major banks imploding recently, Bitcoin remains resilient, but questions persist over the long-term sustainability of its ongoing rally.
On March 19, the United States Federal Reserve announced that it had entered a joint program with several major central banks — including the European Central Bank, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National Bank — to support U.S. dollar cash flow and alleviate strains in global funding markets.
Moreover, Fed Chair Jerome Powell said swap lines — agreements between two or more central banks to maintain a crucial liquidity backstop and ease strains in global funding markets — will remain active until at least the end of April.
This could result in the Federal Reserve slowing its rate hikes, which have been cited as a contributing factor to the ongoing banking crisis.
Since the beginning of March 2023, several major financial entities, including Silvergate Bank, Silicon Valley Bank (SVB), Signature Bank and Credit Suisse, have collapsed.
Despite these developments, Bitcoin has rallied, reaching a high of $28,500 on March 24, its highest level since the crypto crash of June 2022. After a slump in March, where the flagship cryptocurrency dropped below $20,000, Bitcoin seems to have resumed its 2023 rally.
Since January, when Bitcoin traded at around $16,500, the digital asset has gained an impressive 72.73%. Of the roughly 4,600 days of Bitcoin as a tradable asset, investors have experienced 4,065 profitable days, challenging the instability-driven narrative surrounding the crypto ecosystem.
The Banking Crisis Explained
In recent weeks, the global banking industry has been rocked by a slew of events, sending shockwaves through financial markets. In Europe, Credit Suisse collapsed and had to be “rescued” by rival bank UBS.
This development did not surprise those following Credit Suisse’s monetary and legal troubles, which have been widely reported for months.
The Swiss National Bank and the Swiss Financial Market Supervisory Authority agreed to back up Credit Suisse with an emergency loan of 50 billion francs ($54.5 billion) if necessary.
UBS agreed to purchase Credit Suisse for $3.25 billion, which is less than half its market value just days before, but much higher than the initial offer of $1 billion, which Credit Suisse declined.
Meanwhile, the United States faces its own banking crisis across the Atlantic. Several banks, including SVB, Signature Bank and Silvergate Bank, have collapsed recently, prompting the Federal Reserve and the government to shore up depositors.
The banks mentioned above all faced large-scale bank runs.
These events typically occur when a bank loses the confidence of its customers, resulting in mass withdrawal requests.
In response to these developments, the Fed has used the Bank Term Funding Program (BTFP) to inject additional liquidity into the banking system and cover deposits, with politicians reassuring the public that the banking system is secure.
While these actions have attempted to restore confidence in the banking system and financial markets, some analysts warn they may only provide a short-term solution.
A recent study has shown that the U.S. banking system is highly vulnerable, with many banks potentially becoming technically insolvent during a bank run. Assuming the worst-case scenario of 100% uninsured deposits withdrawn, the study’s authors note that over 1,600 U.S. banks could collapse overnight.
What’s even more head-scratching is the researchers suggest that even if just 30% of uninsured deposits were to be withdrawn, 106 banks would collapse.
The Numbers Seem To Be In Favor Of Crypto
Bitcoin has been on a roll, gaining more than 13% over the past week and trading at $28,430 at the time of writing. The troubles facing the traditional banking system have raised concerns about trust in traditional assets, with more money seeming to flow into Bitcoin.
According to data from Coinglass, open interest in Bitcoin futures reached $12 billion over the weekend, a yearly high pointing to renewed interest in the flagship cryptocurrency.
Bitcoin open interest refers to the total number of outstanding positions in Bitcoin futures contracts that have not been closed or settled. It is a measure of market activity and interest in Bitcoin futures trading. When open interest is high, it suggests a lot of investor interest in BTC and vice versa.
The renewed interest in crypto comes amid growing concerns over inflation, increasing global debt levels, and the unprecedented monetary and fiscal policies adopted by central banks and governments worldwide.
What Lies Ahead For Bitcoin?
With the ongoing fiscal momentum surrounding the crypto sector showing no signs of abating, $30,000 has continued to serve as a significant hurdle for Bitcoin.
However, if the digital asset approached or breached this level, many bulls could rake in short-term profits for themselves, potentially causing the cryptocurrency to dip again.
In an interview with Barron’s, Alex Thorn, head of research at digital asset group Galaxy, said we could be witnessing a seminal moment for Bitcoin.
He believes that as the fractionally reserved banking system teeters on the brink, “Bitcoin’s resilience, predictability, and relative safety stands in stark relief.”
Moreover, the Crypto Fear & Greed Index hit its highest index score this year, recording 66 on March 20. These levels have not been seen since Bitcoin posted its all-time high in November 2021. As of March 24, the index is sitting on a rating of 61, placing it firmly in the “Greed” territory.
The Crypto Fear and Greed Index aims to numerically present the current “emotions and sentiments” toward Bitcoin and the cryptocurrency market, with the highest score being 100.
The last time the index recorded a score above 66 was on Nov. 16, 2021, just days after Bitcoin’s all-time high of $69,000.
Chris Bradbury, CEO of decentralized finance platform Oasis.app and former lead product manager for MakerDAO, told Cointelegraph the latest rally is related to banking collapses and the broader fear in the U.S. and European banking sector, which saw vast amounts of value wiped out of bank stocks. He added:
“It’s unlikely we will see a sustained rally directly from this; however, we have started to see activity on-chain picking back up since the start of the year and a little bit more optimism more generally in the markets.”
Other observers of the crypto space think the recent pump is explained by factors that are less generous to the hypothesis of crypto as a safe haven and alternative to the traditional financial system.
Crypto researcher and software engineer Molly White recently noted that, among other things, Bitcoin is experiencing low liquidity and could also serve as an exit for traders nervous about stablecoins.
As USD Coin-to-dollar off-ramps were limited early in the banking crisis, many decided to move to different crypto assets like Bitcoin, White argued.
She further stated that influential people stand to benefit from an increased Bitcoin price. Ex-Coinbase chief technology officer Balaji Srinivasan made a $2 million bet that Bitcoin will hit $1 million in the next 90 days based on a belief that incoming liquidity from the Fed will “hyperinflate the dollar.”
As White posited, “If he owns a lot of Bitcoin already, or has OTM [out of the money] long positions, $3 million (counting the two bets plus the $1 million in tweet payments) would be a small price to pay if he can get BTC to tick up a few percentage points.”
As we head into a future plagued by growing financial uncertainty, it will be interesting to observe how the crypto market wades through the macroeconomic uncertainty permeating the global economy.
3 Strategies Crypto Firms Can Use To Land A New Banking Partner
After the recent collapse of three crypto-friendly banks, many firms are left hunting for new banking partnerships. Brett Philbin, Rachel Millard and Rosie Gillam of Edelman Smithfield offer advice.
If your crypto firm is on the hunt for a new bank, you are not alone.
The recent collapse of three crypto-friendly banks has added a fresh obstacle for digital asset firms that are still grappling with the impact of crypto winter and a regulatory crackdown.
But communications can play a key role in helping you define your public image and potential risks associated with your business – factors that potential banking partners are watching closely.
Brett Philbin is an executive vice president, Rachel Millard is a senior vice president and Rosie Gillam is a senior vice president in Edelman Smithfield’s Financial Services Practice.
Below Are Three Strategies That Can Aid In The Banking Courtship Process:
Clearly Articulate Your Focus On Risk And Compliance
There is high value in ensuring that the controlled elements of your business are front and center. Crypto is the least trusted of financial services subsectors, according to the 2023 Edelman Trust Barometer, which in November surveyed more than 32,000 respondents across 28 countries.
That’s a big reason why it’s critical that licenses, registrations and compliance standards are included in a prominent place on your website. Consider making them central to your “about the company” message. Highlight any compliance or financial health measures your company takes.
Ensure your risk management officer or chief financial officer is featured on the website along with their bios.
This step sends the message to prospective banking partners that you have someone in-house who can interact with them in the way they’re accustomed to working. These seemingly minor changes are valuable: They highlight the measures you have taken to reduce risk within the company.
Revisit Messaging On Your Corporate Website And Social Channels
Assume potential banking partners will do their homework by visiting your corporate website and your corporate social channels to deepen their understanding of your business, your leadership team and recent developments that could impact whether or not they choose to partner with you.
Make certain that critical information is accessible and understandable (spend time carefully crafting your “about” page). This is especially important if you operate in a niche category within the broader crypto ecosystem.
A decentralized exchange, for example, should be explicit in explaining how it differs from a centralized exchange, to help less-adept audiences understand the nuanced differences between the two.
Beyond the website, be sure to conduct a quick refresh of your social channels. Your online presence and demeanor can play a role in the evaluation process.
Use these channels to communicate updates about the company, including any recent developments that demonstrate long-term viability such as customer wins, partnerships and product launches.
On the other hand, while Crypto Twitter is awash with policy hot takes, consider whether your company is in the best position to contribute to this conversation.
Banks evaluating potential partners may weigh the liability associated with a firebrand company leadership willing to tweet at any regulator without regard for the impact it could have on their image.
Engage Trade Associations To Fight Some Battles
For many organizations, it’s better to skip the hot-take policy tweet and instead consider engaging with industry trade associations to carry forward those concerns and objectives.
Trade associations carry weight within Washington, D.C. They are able to take tough policy positions publicly and generate media interest in them in a way that individual companies cannot.
These organizations can also help broker productive and impactful backroom conversations with policymakers and facilitate introductions to potential partners and allies that can be helpful in driving longer-term growth strategies for your business.
Now more than ever, it’s clear the first stop on the road to mass crypto adoption is for firms to find a bank they can trust. The right communications strategy can help ensure you don’t end up having to settle for a tier-2 or tier-3 banking option. Employ these tactics to expedite your transition to a new banking partner today.
Turns Out The World’s Favorite Safe Asset Isn’t Risk-Free After-all #GotBitcoin
US Treasuries came back to haunt investors and bankers who ignored the basics of interest-rate risk—and there could be more surprises in store.
Look deeper into the latest US banking crisis, and the cause may come as a surprise to anyone still thinking in terms of the crash of 2008. It wasn’t dodgy loans to impecunious homebuyers that sank Silicon Valley Bank.
It was a stash of what are thought to be the safest securities on Earth: US Treasuries.
Those loans to the government were, of course, entirely safe in a very important sense. Uncle Sam is going to be good for the cash. (Set aside an unforeseen disaster with the debt ceiling—more on which in a moment.) But the final repayment date of SVB’s bonds was typically years away.
The problem is what happens to their price in the meantime. Purchased during a time of ultralow interest rates, those long-maturity Treasuries were always liable to lose their immediate resale value if rates took off. Which they’ve done in a big way over the past year.
The Federal Reserve raised rates at the fastest pace in decades to tame inflation, pushing its key policy rate from about zero to a range of 4.75% to 5%. Treasury prices spiraled downward, since bond prices move in the opposite direction of rates.
That’s only an immediate problem for someone who wants to sell a bond before it matures. Unfortunately for SVB, it fell into that category.
Its clients, many of whom had much more than $250,000—the cap on federal deposit insurance—at the bank, got nervous and started yanking out their money. SVB could only sell Treasury holdings, as well as mortgage bonds backed by government agencies, at steep losses. The bank collapsed within days.
“We always refer to Treasuries as the world’s safest asset,” says Paul McCulley, the former chief economist for Pacific Investment Management Co. “That’s from the standpoint of credit quality. That’s not from the standpoint of asset price stability. There’s a huge difference.”
Kim Forrest, chief investment officer of Pittsburgh-based Bokeh Capital Partners, says she can’t get over how SVB bankers failed to spot the duration risk they were taking. “It’s kind of head-spinning,” she says.
“They have to really know the parameters of what is going to happen to these bonds, given the forecasts for interest rates. What the heck happened? The supposedly bright people out in Silicon Valley couldn’t put that together and do a little calculus?”
Most banks don’t have as many uninsured deposits from jumpy tech startups as SVB did, but US lenders hold more than $4 trillion in government-backed securities. And Treasuries last year posted their worst losses since at least the early 1970s, with the longest-dated ones tumbling almost 30%.
That’s one reason fear of bank contagion won’t go away, even after the Department of the Treasury, the Fed and the Federal Deposit Insurance Corp. swooped in to offer emergency protection for all depositors at SVB and New York’s Signature Bank, which collapsed around the same time.
Policymakers haven’t said for sure whether other lenders will enjoy the same cover. Deposits have continued to flow out of banks—especially smaller, regional ones.
The Fed loaned billions to banks after SVB’s collapse to ensure their liquidity, including new emergency programs that offered generous terms for borrowing against Treasuries and other bonds that had lost value.
Essentially, the central bank—which already holds trillions of dollars’ worth of the low-yielding debt issued in the pandemic—was taking even more interest-rate risk out of the banking system.
But the Fed is also pushing ahead with monetary tightening. It raised rates another quarter of a percentage point on March 22. Bond prices have rallied anyway, because markets think Chair Jerome Powell and his colleagues will change course. If they don’t, that could spell more losses for Treasuries—and more trouble for banks that hold them.
Rising rates aren’t the only problem in the $24 trillion Treasury market. Another is a long-standing concern about the market’s liquidity—essentially, the ease with which trades can be carried out.
Many institutions and businesses count on the Treasury market to function smoothly. The past month’s fear and uncertainty has created near-unprecedented volatility, with the largest swings in some yields seen in 40 years.
Liquidity was “significantly compromised,” JPMorgan Chase & Co. strategists told clients in mid-March, as trading in Treasuries surged to a record $1.5 trillion on one day.
There are various explanations of the liquidity problem. Treasury debt has ballooned by more than $7 trillion since the end of 2019, and there’s a widespread belief that the size of the market has outstripped the capacity of bank dealers to keep it orderly.
Many say regulations imposed on banks after the 2008 financial crisis have also crimped dealers’ ability to keep enough bonds on hand to make sure buying and selling proceeds without hiccups
The Fed, Treasury and other regulators have been working for years on proposed fixes, but change has been slow in coming.
Then there’s the looming debt ceiling standoff—the possibility that politicians won’t reach a compromise on raising the nation’s self-imposed borrowing limit.
Failure to do so before the Treasury runs out of ways to keep funding government spending could potentially trigger an unprecedented default on US public debt and throw a wrench into the global financial system that relies on Treasuries.
The 2011 debt ceiling episode spurred S&P Global Ratings to downgrade US government bonds from the top AAA rating, days after a deal to lift the limit and avert default was reached.
The recurring fights in Washington over debt limits may be one reason investors around the world have been showing more interest in potential alternatives to US Treasuries as a safe place to store wealth.
Another is America’s aggressive use of financial sanctions, including the freezing of Russian central bank assets after the invasion of Ukraine, which has left some countries that hold lots of Treasuries wondering: Could that happen to us, too, someday?
Global alternatives that sometimes get touted include old favorites such as gold, new monetary units based on commodity baskets, or the currencies of other large economies, like China’s yuan—even though it’s hard to make a persuasive case that any of them are better than Treasuries.
For many American investors seeking a risk-free asset, cash seems like the best option. Below the $250,000 cap on FDIC insurance, a bank account is reliable.
But many individual and institutional savers alike have over the past months been seeking other options, like higher-yielding US money funds—which just attracted their biggest weekly influx since early in the pandemic.
Those funds invest heavily in Treasuries, though at very short maturities that largely protect them from interest-rate risk. As rates go up, the funds can keep rolling over their holdings and pay investors the new higher rates.
How much more volatility is in store for Treasuries—and how much more damage the financial system suffers as a result—mostly hinges on the Fed.
History suggests the US central bank has a poor track record when it comes to pulling off a major policy shift without something blowing up. SVB is already Exhibit A for this cycle.
McCulley recalls the wrecking of the US savings and loan industry in the 1980s—smallish mortgage lenders who went bust partly as a result of the same kind of duration risk that’s piled up on bank balance sheets today.
He points out that the Fed has been raising rates at the fastest pace since back then, when former Chair Paul Volcker oversaw the inflation fight. And he says his key question for the Fed is this: “For the last year you’ve been channeling Paul Volcker. How much Volcker is too much Volcker?”
Bitcoin Rallies Past $30,000 Mark For The First Time Since June
* World’s Largest Digital Asset Gains About 80% Year To Date
* Analysts Say Rebound Is Partially Due To Lower Liquidity
Bitcoin climbed above $30,000 for the first time since June, bolstered by bets on easier monetary policies that have made cryptocurrencies standout performers this year.
Bitcoin is now up 82% since Dec. 31, handily beating the tech-heavy Nasdaq 100’s 19% gain. Gold, another investor favorite this year, has climbed around 10%. Crypto’s rapid ascent has seen Bitcoin vault past where it stood when hedge fund Three Arrows Capital imploded last summer — yet it remains more than 50% below its all-time high in November 2021.
“30K is obviously a psychological magnet now,” said David Brickell, director of sales at Paradigm. “The bigger question is why is BTC not higher,” he said, adding that the coin looks to be ready to “take the next leg higher.”
Underpinning Bitcoin’s partial comeback are expectations that the banking crisis that erupted in the US in March will force the Federal Reserve to hit pause on rate increases.
That’s boosted the view among Bitcoin bulls that the token stands to gain from lower real interest rates, and that it offers shelter from turmoil in traditional finance.
“This rally may, in part, be driven by the expectation that rate hikes are almost done, but some groups of investors are drawn to crypto because it’s an asset outside of traditional banking and finance,” said Bradley Duke, co-chief executive officer of crypto exchange-traded product provider ETC Group.
Digital assets over the past two sessions broke out of weeks of range-bound trading, with analysts also citing technical factors as having given the token a nudge.
But hanging over the rally is persistently low liquidity, which bears say distorts pricing and could cause a rapid reversal should central banks stand firm on battling inflation.
“30K is very significant for both technical and fundamental reasons,” said Mati Greenspan, Quantum Economics chief executive officer. “The resistance has been building up for three weeks straight and has now finally broken.”
Bitcoin’s breakout above stiff resistance at $30,000 comes after a so-called squeeze of the Bollinger Band, which saw historical volatility fall to the lowest since January.
The compression back then resulted in a sharp move upward that looks similar to Tuesday’s upside breakout.
Traders following technical patterns may now be looking at the $30,800 area as a first potential objective, followed by $31,200.
Punching past those levels would take Bitcoin close to another psychologically important threshold: erasing all losses since the tumultuous unwinding of the TerraUSD stablecoin in early May.
That event set the stage for a deep market swoon and the demise of some of crypto’s best-known names, from 3AC to lender Celsius Network and exchange FTX.
“The return is there, so it’s still attractive if you’re trying to generate 20%, 30% or even something higher if you’re willing to hold the coins for longer,” said Brandon Mulvihill, CEO at Crossover, a cryptocurrency trading venue for institutional investors.
To be sure, the crypto industry as a whole faces immense scrutiny.
Crypto exchange Coinbase Global Inc. said it has received a notice from the Securities and Exchange Commission declaring its intention to bring an enforcement action. The SEC has sued crypto mogul Justin Sun for allegedly violating securities rules in a case Sun said lacks merit.
And elsewhere, the US Commodity Futures Trading Commission has sued Binance founder Changpeng Zhao and his crypto exchange for alleged violations of derivatives regulations, though Binance has said it doesn’t agree with many of the agency’s characterizations.
But even with the setbacks, Bitcoin’s rally has gained strength over the past month following the collapse of three US banks, which revived the narrative among Bitcoin bulls that the token offers a more attractive alternative to traditional finance.
Furthermore, analysts say a drop in liquidity to a 10-month low — after market makers lost access to US banking rails provided by Silvergate Capital Corp. and Signature Bank — could also explain the rebound, at least in part. With lower trading volume, price swings can look more dramatic.
“Order books are thin and trading activity is depressed,” said Strahinja Savic, head of data and analytics at FRNT Financial. “Under these circumstances, it is possible that we see price action that is difficult to pin to any one reason.”
Bitcoin In Circulation: Over 50% Hasn’t Moved In 2 Years, Glassnode Says
Some believe that investors who bought during Bitcoin’s all-time high price are waiting for the right time to sell.
More than half of all Bitcoin in circulation has not been touched for two years, according to data compiled by the crypto analytics platform Glassnode.
On April 10, crypto influencer Anthony Pompliano highlighted that 53% of Bitcoin’s circulating supply has been inactive in the last two years.
Citing data published by Glassnode, Pompliano pointed out that this is a new all-time high for this specific metric tracked by the data platform.
More than 1 out of every 2 bitcoin in circulation has not moved in the last 2 years.
We hit a new all-time high of 53% today. pic.twitter.com/W6GzopMAtu
— Pomp (@APompliano) April 10, 2023
In addition, the crypto entrepreneur also pointed toward other metrics, such as Bitcoin, which hasn’t moved for five and 10 years. According to the data, almost 29% of Bitcoin’s circulating supply has not been moved in the last five years. This amounts to over 5.6 million BTC, worth around $158 billion at the time of writing.
Around 2.7 million BTC, worth $76 billion, have not been touched in a decade. Pompliano commented that these Bitcoin could potentially be lost or are in the hands of “the most disciplined investors in the world.”
Some community members believe that the data means those holding bought when BTC was at an all-time high and are waiting for the right time to sell. On April 10, 2021, BTC was trading above $60,000, according to the coin information aggregator CoinGecko.
Meanwhile, the keyword “Bitcoin” recently topped the list of most popular search terms in the United States, suggesting that Americans have been curious about Bitcoin lately. The term surpassed other trending keywords, such as the former U.S. president Donald Trump and American singer Elvis Presley.
The increase in American search interest for Bitcoin follows an announcement by the United States Federal Reserve confirming the launch of the FedNow payments system. On March 16, the U.S. government said that the instant payments platform will be launched in July.
Bitcoin Faces Low Risk of ‘Liquidations-Induced’ Price Volatility After 70% Surge
Liquidations refer to the forced closure of bullish long and bearish short positions in leveraged perpetual futures markets. They often exacerbate price moves.
Bitcoin (BTC) has surged 70% this year, hitting nine-month highs of over $29,000. While the sharp rally has brought the derivatives market back to life, the overall use of leverage remains muted, suggesting a low risk of “liquidations-induced” wild price swings.
Liquidations refer to the forced closure of bullish long and bearish short positions in leveraged perpetual futures markets, which allow traders to open positions worth much more than the money deposited as margin.
The forced closure for cash or cash equivalent happens when the trading entity fails to meet the margin shortage stemming from the market moving against its bullish or bearish bet.
When the degree of leverage in the market – measured by the ratio between the dollar value locked in perpetual futures (open interest) and the cryptocurrency’s market capitalization – is high, short liquidations tend to exacerbate bullish moves. That, in turn, shakes out more shorts, leading to a short squeeze. Similarly, long liquidations exacerbate bearish moves, leading to a long squeeze.
Long/short squeezes were quite common during the 2021 bull run and early bear market days of 2022 when the amount of leverage outstanding relative to the size of the market was quite high and price moves would shake out billions of dollars’ worth of leveraged trading positions. So far this year, the ratio has continued to drop.
“High open interest relative to market cap means the market could be vulnerable to a short-squeeze or liquidation cascade, which would result in a price swing being more volatile than it otherwise would have been due to forced buying or selling, respectively,” analysts at Blockware Solutions said in a weekly newsletter.
“The medium-term trend of decreasing open interest/market cap has not been broken, which is reassurance that, even in the event of downward volatility, price is most likely not going to decrease to the level it was at to begin the year,” the analysts added.
The perpetual futures open interest to market ratio has been falling since FTX, which was once the third-largest cryptocurrency exchange in the world and one of the preferred avenues to trade perpetual futures, went bust in early November.
The ratio has stayed low despite the recent price consolidation, a sign of investors’ low appetite for risk, according to Blockware Solutions.
“BTC has essentially traded sideways for the past three weeks, yet, we haven’t seen a build-up in open interest. This is a signal that the market is still in a risk-off mode,” Blockware’s analysts noted, saying the non-expiring perpetual futures are typically in demand during periods of sideways price action, as seen ahead of FTX’s implosion.
Bitcoin has been locked in the narrow range of $29,000 to $27,000 since March 21, according to CoinDesk data.
Riot Platforms And Marathon Digital Lead Crypto Stock Gains As Bitcoin Stays Above $30K
The price of bitcoin is now up by more than 80% so far in 2023.
Crypto-related stocks are having a second day of big gains after bitcoin (BTC) on Monday evening pushed through $30,000 for the first time since June 2022. At press time, it’s managed to hold that advance, trading at $30,100.
Bitcoin miners Riot Platforms (RIOT) and Marathon Digital (MARA) are ahead 15% and 11%, respectively. Shares of smaller players Stronghold Digital (SDIG) and Iris Energy (IREN) are up by nearly 20%.
The big advance in bitcoin over the past two days has pushed MicroStrategy’s (MSTR) holdings – 140,000 coins purchased at an average price of $29,803 each – back into profit. MSTR shares are higher by 7% on Tuesday.
Crypto exchange Coinbase (COIN) and Mike Novogratz’s crypto merchant bank Galaxy Digital (GLXY.TO) are also each up by about 7%.
Bitcoin pulled out a tight range around the $28,000 level on Monday afternoon and then pushed through $30,000 for the first time since June 10, 2022 late Monday evening, rising to as high as $30,400. The crypto is now up more than 80% in 2023 after having started the year at about $16,500.
9 Tips To Help Crypto Companies Choose And Succeed With A Banking Partner
Before reaching out to a potential banking partner, it’s wise to know both what they can offer and what they’ll expect.
Choosing the right banking partner can be a particularly tricky process for a crypto or blockchain company. While there are many options in the market, only a few will possess the experience, commitment and risk tolerance companies in a young and tech-forward industry need.
And simply making a choice won’t seal the deal: Crypto and blockchain entrepreneurs must have the detailed information banks will demand at their fingertips and be ready to reciprocate the transparency they themselves expect from a financial partner.
There’s a lot of homework to be done before beginning any sort of outreach, so knowing what to look for as you begin the research is a helpful head start.
Below, nine members of Cointelegraph Innovation Circle share their advice for crypto and blockchain companies that are beginning the process of choosing a banking partner.
Review The Bank’s History With Your Niche And Its Corporate Footprint
Look at the bank’s background supporting other companies in your specific niche. Be cognizant of treaties or laws applicable to the bank’s corporate entity and any privacy-related concerns those could raise for you or your users.
Ensure that the bank values ethics, compliance and due diligence, because the way they behave with you will be the same way they behave against you should the need arise. – Jason Fernandes, AdLunam Inc.
Look For Solid Compliance And Risk-Management Policies
Look for a banking partner that’s well-versed in the crypto regulatory landscape. Always make a point to prioritize (with caution) a banking partner that comprehends the intricacies of the industry and has solid compliance and risk-management policies.
There should also be alignment on your company goals and the cadence of executing your company vision. – Vinita Rathi, Systango
Examine The Bank’s Relationships With Regulators
One of the most important criteria for crypto companies to keep in mind is a bank’s regulatory compliance so as to maximize lawfulness and security.
Companies should do their due diligence and research how closely banks are working with regulators, their previous track record with crypto companies and their level of risk tolerance. – Anthony Georgiades, Pastel Network
Look For Agility And Readiness To Adapt To Changing Regulations
It is essential to choose a compliant bank that can benefit your company for a long time to come. Due to the ever-changing regulatory landscape of cryptocurrency, ensure that your banking partner is agile in this respect and has a thorough understanding of Anti-Money Laundering regulations and Know Your Customer checks to ensure your company continuously operates in a compliant manner. – Sheraz Ahmed, STORM Partners
Get References From Other Client Companies
Do your due diligence by checking the bank’s background and track records and getting references from other companies in your network that have used or are using the bank.
Do not put all your eggs in one basket. Have an alternative ready in case something suddenly happens to the bank. – Sharon Yip, Polygon Advisory Group, LLC
Pay Close Attention To The Security And Tech Infrastructure
Thoroughly analyze the bank’s security and technology infrastructure. You need a bank that prioritizes vigorous security measures and uses the latest technologies.
This will give you peace of mind that your money is safe. Further, there is a higher chance a tech-savvy banking partner will be able to smoothly integrate your existing systems and processes. – Bogomil Stoev, Seasonal Tokens
Prioritize Transparency Around Policies
When choosing a banking partner, it’s crucial for crypto and blockchain companies to find a bank that understands their unique needs and is willing to work with them.
Look for a bank with experience in the industry and a willingness to be transparent about its policies regarding crypto-related transactions. – Theo Sastre-Garau, NFTevening
Thoroughly Prepare Your Presentation And Documentation
Finding a crypto-friendly banker is an arduous task, so being thoroughly prepared with your company presentation is of the utmost importance.
Crypto-friendly banks have a long list of prospective companies, so when preparing, be sure to include all necessary and proper company documentation for packaging your blockchain solution. This will go a long way in speeding up an already tenuous process. – Chris Groshong, CoinStructive, Inc.
Ensure There’s Clear Separation Between Your Multiple Business Lines
If you have multiple lines of business, you must maintain a clear separation between your crypto and/or DeFi business and your other businesses.
If the bank you use for your traditional business thinks there is any chance you are commingling funds, it will immediately close your accounts, and your relationship with that bank will unceremoniously end. – Brad Spannbauer, Currency Hub
The Regional Bank Selloff Visualized
A look at the health of six regional lenders.
Some investors are still worried about the health of regional banks as another week of turbulence sent shares of many of the companies tumbling before a rally Friday.
In a week that included another interest-rate hike by the Federal Reserve and a rescue of First Republic by JPMorgan Chase, the KBW Regional Banking Index, which tracks regional banks in the U.S., was down 28% this year, through Friday.
This comes after two months of turbulence in the banking industry that was triggered by the collapse of regional lenders Silicon Valley Bank and Signature Bank. Some banks have suffered more than others. PacWest Bancorp has seen its market capitalization decline by 75% this year.
Metropolitan Bank Holding’s shrank by 60% since the beginning of the year, while Western Alliance Bancorp and First Horizon’s value waned by 53% and 55%, respectively.
Each bank experienced a reduction in deposits during the first quarter. As the Fed continued raising interest rates this year, many customers moved their money out of checking accounts and into products such as money-market funds and Treasurys, which are paying greater yields.
Short interest in regional-bank stocks has picked up since Silicon Valley Bank failed in mid-March. As of Wednesday, more than 18% of PacWest’s shares were sold short, according to data from S3 Partners.
Short sellers, often active institutional investors, sell shares that they have borrowed in hopes that they can buy them back at a lower price.
Concern Over Banking Crisis Reaches Levels Unseen Since 2008
According to a recent poll from Gallup, nearly half of Americans are concerned about the safety of their money deposited with banks.
Public opinion of banks appears to be dwindling according to an April survey, as the industry struggles to contain the collapse of several high-profile financial institutions in recent months.
A Gallup poll conducted across the United States in April with at least a thousand respondents revealed that 48% of them said that they were concerned about their money in the bank, with almost 20% who indicated they were “very concerned.”
It should be noted however that the poll was conducted after the collapse of Silicon Valley Bank and Signature Bank, but before First Republic Bank failed in late April.
Republicans, lower-income adults and those without a college degree are more worried than their counterparts about the safety of their money in banks or other financial institutions. https://t.co/qhaQqu3mW6
— GallupNews (@GallupNews) May 7, 2023
Gallup concluded that the level of worry was on a par with that measured during the last bank-induced financial crisis in 2008 “when financial institutions previously believed to be “too big to fail” collapsed.”
“The latest readings are similar to those in 2008. In September of that year, shortly after the collapse of Lehman Brothers, which remains the largest bankruptcy filing in U.S. history.”
Hundreds of American Banks At Risk
Meanwhile, experts at the Hoover Institution think tank postulate that if half of all uninsured savers withdrew all of their cash, 186 American banks would be at “potential risk of impairment.”
These banks have total assets of $300 billion but represent less than 5% of the estimated 4,135 FDIC (Federal Deposit Insurance Corporation) insured commercial banks in the United States.
Furthermore, according to reports, California-based PacWest, Arizona’s Western Alliance, and Memphis-based First Horizon hang in the balance following a share price slump last week.
A more damning report emerged from the UK’s Telegraph earlier this month, suggesting that half of the banks in America could be insolvent.
It cited research published in April by Stanford University banking expert Amit Seru, who estimated that more than 2,315 U.S. banks are currently sitting on assets worth less than their liabilities.
“The U.S. banking system’s market value of assets is $2.2 trillion lower than suggested by their book value of assets accounting for loan portfolios held to maturity,” he said.
Meanwhile, Long-Term Bitcoin Holders Add To Their Holdings, Even As Prices Retrace
As longer term bitcoin supply increases, the CoinDesk Bitcoin Trend Indicator (BTI) shows a market in uptrend, despite recent price declines.
Long-term bitcoin holders are continuing to add to their bitcoin holdings, despite BTC trading at a slight premium. Meanwhile the CoinDesk Bitcoin Trend Indicator (BTI) is showing that the asset is in the middle of a significant uptrend.
Long-term holders’ 30-day change in bitcoin supply has been trending higher since March 31. Long-term supply is defined as coins that investors have been holding for 155 days or more.
As these investors are often less likely to spend older coins, an increase in the metric reflects dormant supply, as well as bullish sentiment.
The uptick is occurring as bitcoin prices have flattened over the identical period, implying that bitcoin holders view the recent pause in price movement as an opportunity to acquire more. Year-to-date, bitcoin prices are up 68%.
The increase also occurs as bitcoin’s Network Value to Transaction (NVT) value of 57 is 6% higher than its year-to-date average of 53.7. The NVT ratio is calculated by dividing BTC’s market capitalization by its transferred, on-chain volume.
Comparable to the price-to-earnings ratio in equities, higher NVT levels indicate that bitcoin is overbought, while lower values indicate that it may be oversold.
In this case, the close proximity to its average implies a market trading at a slight premium, but relatively in balance at the moment.
Meanwhile, CoinDesk’s Bitcoin Trend Indicator is implying that price may move higher.
The tool, which was developed by CoinDesk Indices, produces a daily signal indicating the direction and strength of bitcoin’s price trend.
Using a series of moving average crossover windows, the tool broadcasts one of five daily values ranging from “significant downtrend” to “significant uptrend.” BTI indicates that bitcoin is in the middle of a significant uptrend.
Traders with a short-time horizon will likely note that BTI flashed the uptrend signal on April 28, following a decline into neutral territory. BTC prices are down 5% since that specific signal.
A year-to-date time horizon will show that the first uptrend signal of 2023 occurred on Jan. 13, with BTC prices increasing 40% since that date.
Warren Buffett Dumps $13.3B In Stocks — A Warning Sign For Risk Assets?
The “Oracle of Omaha” has increased Berkshire Hathaway’s cash holdings by $2 billion in Q1, signaling his decreasing confidence in risk assets.
Warren Buffett moving into cash suggests he’s bracing for a possible collapse in risk-on asset prices. With Bitcoin up 70% year-to-date and correlated with equities, should BTC investors also prepare for a potential stock market crash?
Buffett Says “Incredible Period” Is Over
Buffett’s Berkshire Hathaway dumped $13.30 billion worth of equities and increased exposure in cash and United States Treasurys in Q1, its latest quarterly earnings report shows.
Meanwhile, it channeled $4.4 billion toward purchasing its own stock and $2.9 billion on the shares of other publicly-traded companies.
The market considers Berkshire Hathaway’s performance as a key indicator to gauge the U.S. economy’s health, given the firm’s holdings range from American railroad to electric utilities and retail businesses.
But the 92-year-old investor, who has credited the U.S. economy’s growth for the success of Berkshire Hathaway in the past, is no longer optimistic.
“The majority of our businesses will report lower earnings this year than last year,” Buffett said last weekend at an event. The “incredible period” for the U.S. economy has been coming to an end over the past six months, he added.
Berkshire raised its cash reserves by $2 billion to $130.60 billion in Q1 2023, the highest level since the end of 2021 when equities entered a bear cycle.
Moreover, the firm holds a vast amount of its cash in short-term Treasury bills and bank deposits, thanks to higher interest rates near 5%.
In other words, Buffett is preparing for a potential stock market crash, particularly as the U.S. banking crisis unfolds, with shares of many banks, such as PacWest Bancorp and Western Alliance Bancorp, sinking.
Bitcoin price stays correlated with Nasdaq
The increasing possibility of a global recession also risks putting downside pressure on Bitcoin, with its 100-week correlation with the Nasdaq reaching its highest level of about 0.42%.
Moreover, Bloomberg Intelligence analyst Mike McGlone expects that BTC price would likely be the leading indicator for a stock crash.
“Bitcoin could pace declines for risk assets — If the worst isn’t over for risk assets, Bitcoin may lead the way lower,” commented McGlone, adding:
“Bitcoin is up about 70% in 2023 to May 2 vs. 20% for the stock index, and those are maybe bounces within broader bear markets. The Fed [is] still tightening in May, and [is] more inclined to stay the course unless risk assets fall to ease inflation, may portend a lose-lose.“
In the short term, there are little expectations from the U.S. Consumer Price Index report on May 10 about easing inflation in April. According to Bloomberg’s survey, economists expect core CPI to remain unchanged at around 5%, suggesting more rate hikes are ahead.
On the other hand, a significant drop in inflation will likely prompt the Fed to consider pausing or even slashing interest rates in an extreme case scenario.
Currently, Fed funds futures’ data suggests that at least five rate cuts between May 2023 and January 2024 are likely, which may pour cold water on Buffett’s risk-off strategy.
A rebound from $27,000 increases the possibility of BTC price retesting $30,000 as resistance and resuming the uptrend of the last few months.
Banking Is Stable? It’s An Illusion
Facing up to risk would allow early intervention to control it. Apparently that’s asking too much.
On taking over the distressed First Republic Bank last week, Jamie Dimon, CEO of JPMorgan Chase, said: “No crystal ball is perfect, but yes, I think the banking system is very stable.” Well, what else was the boss of America’s biggest bank going to say?
The determination to declare that things are under control is widely shared by industry leaders, regulators and policymakers alike. It’s understandable. Nobody wants to start a panic. But that’s also the root of the problem.
Banking is a fundamentally unstable business. Depositors might have no good reason to think their particular bank is in danger, but if they run, they’ll turn out to be right.
Making banks safer through regulation, desirable as that might be, doesn’t always solve this conundrum; depositors also need to believe they’re safe. Making banks safer and making people believe it are often at odds.
Hence a recurring pattern in financial crises: Regulators hesitate to act pre-emptively to deal with stresses before they become dangerous, because identifying an issue and acting early to address it risks causing the very alarm they hope to prevent.
So signs of trouble ahead are quietly set aside. Complacency is institutionalized. And, most strikingly, banks are spared the embarrassment of conforming to accounting principles such as marking assets to market — in part because such candor might scare people.
After the failures, another pattern kicked in. Regulators resolved both SVB and First Republic by quietly amending articles of faith about sound bank regulation, including three canons of the post-2008 regime.
SVB, a medium-sized bank hitherto deemed systemically insignificant, had to be formally upgraded to systemically significant to justify an extension of deposit insurance to all its deposits.
First, this acknowledged much broader fragility than previously allowed. Second, it abandoned the idea that limits on deposit insurance are necessary to apply market discipline to banks’ managers.
Finally, with First Republic, regulators avoided its outright collapse by letting JPMorgan acquire the business — an officially sanctioned resort to the financial dysfunction known as “too big to fail.”
Silicon Valley Bank and First Republic were special cases, but not as special as one might wish. Both were brought down by a combination of surprisingly runnable deposits and unrealized losses on long-term assets.
There was nothing mysterious about either vulnerability. Managers and regulators had the data. But believing that banks are stable induces one to think deposits are sticky and that falling asset values due to higher interest rates cause “paper losses,” not real losses.
This is reassuring until, at a certain point, such beliefs become not just false but untenable. Then the system is suddenly not so stable.
SVB was indeed unusual in relying so much on large, therefore uninsured, deposits; but that isn’t the whole story. When interest rates on cash and close equivalents are zero, there’s no point in searching for better terms.
But when rates go up, depositors start shopping around and moving their money. Technology has made this easier than it used to be.
With or without insurance, this combination of frictionless deposits and rising rates makes retaining customers more complicated. It also unsettles the other side of the balance sheet.
If you have to compete for deposits with higher rates, you might be paying short-term creditors more than you’re collecting from long-term borrowers. If so, you’re losing money and seeing capital erode — today, not in some distant future.
This is a concern for all banks with portfolios heavy in long-term fixed-rate lending for housing or other real estate (like First Republic), or in supposedly safe assets such as long-term government bonds (like SVB).
Keep in mind that the prices of housing and commercial real estate, hence the value of loans linked to those assets, might not yet have fully adjusted to higher rates.
It’s all but impossible to break the cycle of wishful thinking, forbearance and occasional panic. The best approach, no doubt, would be to accept that banking is unavoidably risky and learn to live with it.
In that world, nobody would be unduly alarmed by the asset-value volatility laid bare by mark-to-market accounting, or by prudent early action to reduce leverage — such as selling equity in what might be a falling market or deploying bond-conversion triggers that draw attention when they replenish diminishing capital.
Yet the need to see banking as fundamentally stable is hard to dislodge. Regulators are again insisting that small tweaks to the rules will make banking safe, finally, without eliminating it entirely.
At the simplest level, this ignores the trade-off between risk and return: A bank with more capital, say, or assets and liabilities with more closely matched maturities, is indeed safer — but also less profitable, and to some degree impaired in its purpose of allocating resources.
Worst of all, many ideas for making banks safer really do the opposite. Insuring all deposits, as in the response to the SVB collapse, is the perfect example: It makes runs less likely but encourages banks to take bigger risks.
“Too big to fail” — the JPMorgan remedy for First Republic — creates essentially the same moral hazard.
As long as there are banks, there’ll be banking crises. The slower we are to see the risks, the bigger the eventual damage.
PayPal’s Crypto Holdings Increased By 56% In Q1 2023 To Nearly $1B
The lion’s share of the fintech’s held cryptocurrency assets lies in BTC and ETH with $499 million and $362 million, respectively — up more than 56% since Q4 2022.
Financial technology company PayPal recently disclosed its cryptocurrency holdings in a quarterly report filed to the United States Securities and Exchange Commission.
Claiming a combined total of $943 million in cryptocurrency assets as of March 31, 2023, the filing shows a 56% increase over the company’s previous quarter where PayPal disclosed $604 million.
PayPal’s reported total financial liabilities for this quarter were $1.2 billion, with crypto assets making up 77.9% — up more than 10% from 2022’s reported fourth quarter liabilities.
According to the report, PayPal considers its crypto assets a “safeguarding liability” due to the “unique risks associated with cryptocurrencies.” The disclosure also indicates that the specific cryptocurrencies held by the company remain unchanged since last quarter:
“We allow our customers in certain markets to buy, hold, sell, receive, and send certain cryptocurrencies as well as use the proceeds from sales of cryptocurrencies to pay for purchases at checkout. These cryptocurrencies consist of Bitcoin, Ethereum, Bitcoin Cash, and Litecoin (collectively, ‘our customers’ crypto assets’).”
Custody of the assets PayPal holds on behalf of its customers remains limited to third-party holding companies. PayPal recognizes that this presents a liability for customers in the event that third parties are unable to process transactions — a statement carried over from last quarter’s filing — however, the filing also indicates that no such fault has yet occurred:
“As of March 31, 2023, the Company has not incurred any safeguarding loss events, and therefore, the crypto asset safeguarding liability and corresponding safeguarding asset were recorded at the same value.”
PayPal’s profitability also increased in the first quarter. On a generally accepted accounting principles (GAAP) basis, the company disclosed per-share earnings of $0.70, up from $0.43 in the first quarter of 2022. On a non-GAAP basis, PayPal’s per-share earnings were $1.17, up from $0.88 in the first quarter of 2022.
Bitcoin Price Hits All-Time Highs Across Argentina, Nigeria And Turkey
The new all-time highs come despite Bitcoin still being down over 50% against its price peak of $69,000 against the U.S. dollar.
The price of Bitcoin (BTC) has notched new all-time highs against some of the world’s most inflationary fiat currencies.
Across 30 hours over Oct. 23 to 24, the cost of buying one Bitcoin has reached all time-highs when using the Argentine peso, Nigerian naira, Turkish lira, Laotian kip and the Egyptian pound.
— Miles Deutscher (@milesdeutscher) October 26, 2023
However, it should be noted that the result is due to the ongoing devaluation of the currencies, exacerbated by Bitcoin’s recent 16% price increase.
The naira and lira fell to their lowest points against the United States dollar on Oct. 24 and Oct. 25, while the peso is only 0.85% off its all-time low (against the U.S. dollar).
According to the International Monetary Fund (IMF), the Venezuelan bolivar currently has the highest annual inflation rate at 360%, followed by the Zimbabwean dollar (314%), Sudanese pound (256%) and the Argentine oesi (122%).
The Turkish lira and Nigerian naira came in sixth and 15th with annual inflation rates of 51% and 25%, respectively, IMF’s data shows.
Crypto observers have long seen digital assets, such as Bitcoin and stablecoins, as a hedge against rocketing inflation — and recent figures could bolster that narrative.
Nigeria, Turkey and Argentina boast the second, 12th and 15th highest rates of cryptocurrency adoption worldwide, according to a Sept. 12 report by Chainalysis.
— Michael Saylor⚡️ (@saylor) February 15, 2023
However, the governments of these countries haven’t always seen eye-to-eye with the cryptocurrency industry.
Nigeria is finally becoming more welcoming to cryptocurrencies after its central bank banned local banks from providing services to cryptocurrency exchanges in February 2021.
Progress was made in December 2022 when Nigeria announced its intention to pass a bill recognizing cryptocurrencies as “capital for investment,” citing the need to keep up with “global practices” as one of the main reasons behind its change in stance.
And while Turkey is home to some of the most crypto-curious people, its central bank banned cryptocurrency payments for goods and services in April 2021. It has also been working on a central bank digital currency (CBDC) to digitalize the Turkish lira in recent years.
#Bitcoin fixes this
I’m back in my beautiful country, Turkey, after 6 months. Shocked to witness the same goods costing 3–4 times more already. Rents, food, public transport, and more costs skyrocket regularly. High inflation’s devastation is real and alarming. pic.twitter.com/X4N4Axuh1n
— Gülben Gözü (@gulbengozu) August 28, 2023
Meanwhile, Argentina’s inflation crisis could be influenced by the outcome of its presidential election in November, with presidential candidate Javier Milei set to face competitor Sergi Massa in a final run-off vote on Nov. 19.
Massa, who currently serves as the country’s minister of economy, wants Argentina to launch a CBDC “as soon as possible” to “solve” the country’s long-lasting inflation crisis.
Argentina’s present provides a glimpse into America’s future, where the central bank raised interest rates 15 percentage points to 133% on Oct. 12. But with #inflation running at 138% and budget deficits and debt rising, the rate hikes will have no effect on reducing inflation.
— Peter Schiff (@PeterSchiff) October 26, 2023
He has also voiced an intention to keep the U.S. dollar away from Argentinians, explaining that Argentinians should instead be “patriots” and defend the Argentine peso.
Milei, on the other hand, wants the U.S. dollar to be adopted in addition to abolishing Argentina’s central bank.
Bitcoin Saw 27% October Surge As Traders ‘Panic Bought’ Amid Bitcoin ETF Enthusiasm. Is $40,000 Next?
The crypto rally was broad, as all CoinDesk sector indexes posted 7% to 32% advances.
* BTC Has Advanced 27% In October, Its Strongest Showing Since January, As The Crypto Rally Widened.
* Sentiment Hit An “Exuberant” Level As Many Traders “Panic Bought” Amid The Rally, Matrixport Noted.
* BTC Could Still Run Higher, Targeting $40,000 In The Coming Weeks, An LMAX Strategist Said.
The boredom ended in October as cryptocurrency prices zoomed higher, with the biggest of them all, bitcoin (BTC), posting the strongest monthly rally since January as investors were abuzz with optimism that bitcoin ETFs will soon get approved in the U.S.
BTC gained more than 27%, springing to a 17-month high of $35,000 after hovering around the $27,000 level during the first half of October.
It has recently resided just above $34,000 ahead of the Federal Reserve’s interest rate decision on Wednesday, with market participants largely expecting policymakers to leave rates unchanged.
The rally spread across the broader crypto market, a bullish sign, The CoinDesk Market Index (CMI), which tracks a broad basket of tokens, advanced 22% in October.
The market capitalization of all cryptocurrencies jumped nearly 19% to $1.255 trillion, according to TradingView data, the biggest increase in crypto wealth since the 33% jump in January.
ETFs would be a big deal for bitcoin because they’re far easier for the average investor to buy than the cryptocurrency itself or existing bitcoin investment products, like the Grayscale Bitcoin Trust (GBTC) with $21 billion assets under management.
The U.S. Securities and Exchange Commission rejected GBTC’s conversion into one, but courts have eviscerated that decision, boosting the odds the SEC will have to approve that shift – and likely also bless ETF applications from the likes of BlackRock, the world’s largest asset manager.
Why Did Cryptocurrencies Rally In October?
Investors are excited about the potential for bitcoin ETFs in the U.S.
“A spot bitcoin ETF could bring in as much as $50 billion to $100 billion in inflows over the next five years” and “could have an outsize impact on the price of bitcoin,” Ryan Rasmussen, analyst at asset manager Bitwise, said Tuesday in an interview with CoinDesk TV.
He said he expects the SEC to green light ETF applications as soon as December, before the holidays. Bitwise is one of the firms that wants to list one.
Crypto investment services firm Matrixport said that elevated funding rates on the BTC derivatives market suggest that many traders “panic bought” on the way up in a fear of missing out of the rally.
On top of the ETF hype, sector specific momentum, short liquidations and macroeconomic headwinds also contributed to the price increase, crypto analytics firm CoinMetrics said in a report Tuesday.
“This market movement suggests renewed confidence and indicates a potential shift in the dynamics around digital asset markets,” CoinMetrics analyst Tanay Ved said.
Highlighting a shifting sentiment, investment legend Stanley Druckenmiller said at a Robin Hood fireside chat Monday with hedge fund manager Paul Tudor Jones that he “likes” bitcoin and gold as an investment and store of value asset.
He said he owns gold because it’s a “5,000-year-old brand,” but young people prefer to own BTC because it’s “easier to do stuff with.”
“I don’t own any bitcoin, but to be frank, I should,” he added.
What’s Next For Bitcoin (BTC) Price?
After its blockbuster month, bitcoin hasn’t run out of steam and could run further, analysts suggested.
“The October breakout to a fresh yearly high has opened the door for this next major upside extension, targeting a measured move objective in the $40,000 area over the coming weeks,” Joel Kruger, market strategist at LMAX Group, said in an email.
There Are Now Nearly 40M Bitcoin Addresses In Profit — A New Record
80% of Bitcoin addresses are “in the black” at $34,000, while BTC’s price still trades 50% below its own all-time highs.
Bitcoin has more wallet addresses in profit than ever before despite BTC’s price being 50% below all-time highs.
The latest data from on-chain analytics firm Glassnode shows a record number of addresses “in the black.”
$34,000 BTC Price Returns Over 80% Of Bitcoin Addresses To Profit
Bitcoin may be nearing 18-month highs, but its recent gains were already enough to spark significant changes in investor profitability.
Per Glassnode data, the number of addresses in profit as of Oct. 30 was 39.1 million.
This is the highest number ever recorded for Bitcoin and beats the previous peak of 38.1 million seen in November 2021.
At that time, BTC/USD itself traded at all-time highs, and thus 100% of addresses in existence with a non-zero balance were in profit.
While the current spot price remains 50% lower than those levels, total non-zero addresses now number 48.3 million.
In percentage terms, in-profit addresses have yet to match their performance in absolute numbers but are nevertheless at 18-month highs of 81.1%.
The tally has gone from 60% to 80% over the past two months, Glassnode additionally shows.
By contrast, addresses at a loss currently stand at just over 9 million. At their peak in December 2022, following the FTX meltdown, the total was over 20 million.
Long-Term Holders See “Minimal” Profit-Taking
As Cointelegraph reported, the past week has seen BTC price action pass multiple resistance levels while returning both long-term (LTH) and short-term (STH) holders to profit.
This, in turn, sparked profit-taking at the more speculative end of the hodler spectrum — especially as the market passed $34,000.
For James Van Straten, research and data analyst at crypto insights firm CryptoSlate, this underscores the difference in mentality between cohorts.
“Bitcoin has shown remarkable strength above $34k for the past five days while witnessing one of the strongest profit-takings in the past two years, from STHs,” he argued on Oct. 29.
“LTHs have barely budged, the sixth largest profit-taking this year, but minimal in the grand scheme of things.”
Accompanying charts from Glassnode tracked inflows to exchanges from LTHs and in-profit STH entities.
Bitcoin Supply Held By Long-Term Holders Hits All-Time High — Research
Bitcoin’s recent rally to a 2023 high is backed by on-chain and sentiment data.
Data from Glassnode suggests that Bitcoin is in an accumulation pattern, with its available supply reaching a new historical low. According to the report, Bitcoin’s illiquid supply and long-term holders are increasing.
As its supply tightens, available BTC is being purchased by smaller, long-term holding entities.
Bitcoin accumulation among a majority of investor cohorts and the bullish conviction of long-term holders have resulted in investors gobbling up “92% of the newly mined supply,” according to the Glassnode analysis.
“If we isolate only entities on the smaller end of the scale, such as Shrimps…
Entity Bitcoin Balance Changes Versus Issuance. Source: Glassnode
On the backs of smaller entities accumulating Bitcoin’s minted supply, long-term holders have reached new highs versus short-term holders, something not seen since July 2023. In addition to the solid long-term holder ratio, the short-term holder supply diminished to all-time lows.
Long-Term Versus Short-Term Bitcoin Holder Ratio. Source: Glassnode
The combined effect is creating a tightening of the BTC supply available for purchase, which is possibly helping to keep Bitcoin’s price above $34,000 and providing strong support above $30,000.
In comments to Cointelegraph, LMAX Group market strategist Joel Kruger explained how a Bitcoin price breakout to $40,000 could occur:
“We don’t see anything specific going on with the price of Bitcoin to start the week other than the usual run of steady demand from medium- and longer-term players looking to build exposure. If anything, Bitcoin has actually been more contained of late relative to currencies and risk assets, which have been in notable rally mode on expectations for a more accommodative shift in Fed policy in the aftermath of a run of softer U.S. economic data. Technically speaking, it would take a break above $36,000 to really turn heads and trigger the next wave of bullish momentum.”
Illiquid coins, given Bitcoin’s finite supply, are typically a bullish market indicator. The illiquid Bitcoin supply continues on pace for monthly inflows for another year. The net increase of illiquid Bitcoin is 71,000 BTC per month.
The growing confidence in Bitcoin amid the tightening supply is not limited only to smaller entities. Nearly all cohorts are increasing their Bitcoin holdings year-to-date, an action that is well illustrated by the chart below.
Number Of Bitcoin Millionaire Wallets Triples In 2023
Over 81,000 wallet addresses now hold $1 million or more worth of Bitcoin.
The number of crypto wallet addresses holding more than $1 million in Bitcoin has more than tripled this year.
BitInfoCharts data shows the number of addresses with more than $1 million in BTC increased from 23,795 on Jan. 1 to 81,925 currently, a 237% increase in the last 11 months.
The millionaire wallets are not one-to-one with individual users as many addresses with more than $1 million BTC belong to crypto exchanges and financial institutions.
Comparative data from Glassnode shows the number of addresses holding more than $1 million in Bitcoin peaked during the top of the last bull market in November 2021, posting a record 112,573 addresses on Nov. 9, 2021, the day before Bitcoin notched its all-time high of $69,000 on Nov. 10, 2021.
Meanwhile, the number of so-called “wholecoiners” — wallets with a balance of at least 1 BTC — has increased slightly since the beginning of the year. Currently, there are 1,018,015 such addresses, a 4% increase from 978,197 on Jan. 1.
The largest increase in wholecoiners since 2018 occurred between April and December last year showing a strong accumulation trend despite a broader price decline resulting from a slew of high-profile crypto industry meltdowns.
Bitcoin is currently changing hands for nearly $37,100, up 38% over the last month. Bitcoin’s price has been buoyed by market enthusiasm for multiple pending spot exchange-traded fund (ETF) products.
Bloomberg ETF analysts claim there’s a 90% chance a spot Bitcoin ETF will be approved by Jan. 10, with many expecting a significant price rally to follow.
Despite the market’s bullish sentiment, not all analysts are convinced that a spot Bitcoin ETF approval will launch the next bull run.
CMC Markets analyst Tina Teng claimed while an approval would be a positive for the crypto industry, both Bitcoin and the wider macro landscape lack the required fundamentals to justify an all-out trend reversal.