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Bitcoin Price Metrics Point to Downside Below $22.5K

The recent $1,420 decline in the price of Bitcoin within an hour has negatively impacted the demand for stablecoins in Asia and shifted futures traders into a more defensive attitude.

Bitcoin logo
Bitcoin logo

The decline was caused by Silvergate Bank's 57.7% stock crash due to significant losses and "suboptimal capitalization." The bank was a key financial infrastructure provider for exchanges, institutional investors, and mining companies, and its potential demise could have wide-ranging negative impacts on the crypto sector.

Suspension of Digital Asset Payment Railway

Silvergate Bank discontinued its digital asset payment railway, the Silvergate Exchange Network (SEN), citing excessive risks. The bank also reportedly borrowed $3.6 billion from the U.S. Federal Home Loan Banks System to mitigate the effects of a surge in withdrawals. The discontinuation of SEN has impacted exchanges such as Bybit, which announced the suspension of U.S. dollar transfers after March 10.

Uncertainty in the Regulatory Environment

Fiat on and off ramps have always been troublesome due to the lack of a clean regulatory environment, especially in the U.S. The Wall Street Journal's report on iFinex, the holding company behind Tether and Bitfinex, added to the uncertainty. The report revealed that the group relied on fake sales invoices and hid behind third parties to open bank accounts.

Demand for Stablecoins in Asia

Traders should refer to the USD Coin premium to measure the demand for cryptocurrency in Asia. The index measures the difference between China-based peer-to-peer stablecoin trades and the United States dollar. The USDC premium indicator in Asian markets has been slightly positive for the past three weeks, but it is nowhere near the substantial 4% premium from early January. The metric shows weakening demand for stablecoin in Asia, down from 2.5% in the previous week.

Bitcoin logos
Bitcoin logos

Bitcoin Futures Markets

Bitcoin's quarterly futures are the preferred instruments of whales and arbitrage desks. The chart shows traders abandoned any prospects of exiting the neutral-to-bearish area on March 3 as the basic indicator moved away from the 5% threshold. However, the current 3% premium is lower than last week's 4.5%, reflecting fewer investors' optimism. The 6.2% drop in BTC price had a near uneventful impact on Bitcoin futures markets.

Expected Volatility on March 14

Analysts are focused on the announcement of the Consumer Price Index (CPI) inflation data on March 14. The data tends to spark short-term volatility across risk assets, although it is often short-lived in Bitcoin's price movements. Derivatives metrics currently point to limited pressure from the Silvergate Bank saga. Still, the odds favor Bitcoin bears considering the diminishing demand for stablecoins in Asia and the BTC futures' premium.