Bitcoin Stalls Below $28,000 As Banking Crisis Spills Over to Crypto Market
Bitcoin continued to trade sideways Friday, seesawing in the $28,000 zone after a strong uplift last week.
At press time, the largest cryptocurrency by market capitalization was trading at $27,762, up 4.60% in the past seven days, according to data from CoinMarketCap. Ether also exhibited weak volatility and was trading at $1,761, down roughly 0.30% in the past week. Additionally, most other cryptocurrencies witnessed mild losses apart from XRP, Cardano and Solana, up 12.56%, 4.12% and 4.11% in the past seven days, respectively.
Earlier this week, Bitcoin surged as high as $28,840- a key psychological area- after the US government offered to cover depositors following the collapse of three significant cryptocurrency banks, Silicon Valley Bank, Signature, and Silvergate. However, the collapse seems to have motivated regulators to further tighten the noose around banks with crypto ties, placing the crypto market under immense pressure.
“There are troubling reports of crypto companies having their bank accounts closed, often with no notice and no explanation. They’ve struggled to open new accounts too. This disturbing trend suggests that regulators are trying to cut crypto entirely out of the banking system,” said Jake Chervinsky, Chief Policy Officer at The Blockchain Association.
The U.S. Securities and Exchange Commission (SEC) has also continued to double down its crypto enforcement actions. On Thursday, the regulator issued another notice to investors, urging them to be cautious when investing in crypto assets.
It further noted that “proof of reserves” means nothing, hinting at further enforcement actions against crypto exchanges and stablecoin issuers. At the same time, Coinbase, the second largest crypto exchange by daily volume, also received Wells Notice from the SEC notifying it of the agency’s intention to sue for various securities violations, ZyCrypto reported.
That said, while the purge on crypto by regulators is yet to pan out as such on Bitcoin’s price, it has sapped liquidity for the pioneer crypto asset.
According to Conor Ryder, a researcher for France based on chain analysis firm Kaiko, the liquidity in crypto has been worsening after the banking fears this month, with BTC’s market depth painting a “cautionary picture.”
“BTC liquidity has dropped to 10-month lows as market makers lose access to USD payment rails”, Ryder tweeted on March 23, adding, “US exchanges have been hardest hit due to the closure of USD payment rails and crypto banks Market makers in the region facing unprecedented challenges to their operations.”
However, on a more optimistic note, the pundit highlighted that BTC volumes had at least picked up off the multi-year lows at the end of 2022. “With volumes picking up, just waiting on liquidity to improve for a sustained uptrend in crypto. Otherwise, be prepared for volatility,” he added.
