First Mover Asia: Bitcoin’s Store of Value Narrative Is on Full Display; Crypto Prices Stay Green

Twenty-four hours ago, crypto was in dire straits. The industry’s fiat pipelines were being disconnected one by one. Circle’s USDC had been knocked off its peg, because of its exposure to Silicon Valley Bank, and still hadn’t recovered.

Fast forward to today and this all seems like less of an issue. Depositors are being made whole. Circle said it would cover any shortfall.

Stablecoins are supposed to be the safe haven asset of crypto. They came into the spotlight during the Covid crypto crash of March 2020, and the subsequent bull market, making them a key part of the ecosystem.

“We are closely watching whether this moment creates an opening for other currencies, notably the Euro, to emerge as a linchpin of the digital asset ecosystem,” David Bachelier, Asia-Pacific CEO of Flowdesk said in a note to CoinDesk. “Such an outcome would be positive, as it would bolster the role of the Euro in crypto in terms of trading volumes, too. This would put crypto-fiat trading volumes more in line with proportions of the euro’s trading volumes versus the dollar’s.”

Bitcoin, as BitMEX co-founder Arthur Hayes correctly predicted, is on a rally, up nearly 8.5% in the last 24 hours leaving other cryptocurrencies in its digital dust. Ether is up 5%, Binance’s BNB up 6%, and Dogecoin is up 2.5%.

Layer-1s like Solana, Polkadot, and Avalanche are all fairly flat.

On-chain data suggests that this rally is fueled by a flight from USDC into bitcoin. Data from Nansen shows that the supply of USDC on exchanges has increased over the last few days. Total supply on exchanges is up 8% compared to a week ago. Notably, the largest deposit of USDC in the last 24 hours was 18.3 million, a 41% increase from the prior record of 13 million.

The same can’t be said for USDT. There’s been a 5.7% decline of USDT on exchanges from the last week, which translates into a negative netflow of 96.6 million.

"Bitcoin is rallying as financial stability risks sent Treasury yields crashing. In a scramble to avoid another massive bank run, Federal regulators stepped in as some Americans grew skeptical of traditional banking,” Edward Moya, senior market analyst at Oanda, told CoinDesk via email. “Bitcoin volatility should remain elevated and it will be interesting to see how much momentum will be left with today's surge."

Moya also pointed to gold as a continued safe haven in times of uncertainty with treasury yields.

“Gold's breaking out as volatility is picking up, Treasuries are surging, and it seems there is too much headline risk,” he wrote. “The 2-year Treasury yield is down 49 basis points to 4.095%, which means we are almost down a full-point since last week. ​ The entire Treasury curve is now below Fed's target and that normally means a recession is coming.”

Insights

Will Small Banks Fill the Crypto Gap?

The crypto ecosystem was built on the belief that no one entity, meaning a bank, should be in charge of one individual’s finances, but until that becomes a reality, traditional banking will likely have to serve as a bridge between centralized finance and decentralized finance.

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 as there will likely be other smaller banks that will likely to 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.

Read more: The Banking Crisis Is Not Crypto’s Fault

Read the full version of this analysis here.

Important events.

3:00 p.m. HKT/SGT(7:00 UTC) United Kingdom ILO Unemployment Rate (3M/Jan)

8:30 p.m. HKT/SGT(12:30 UTC) United States Consumer Price Index ex Food & Energy (MoM/Feb)

7:50 a.m. HKT/SGT(23:50 UTC) Bank of Japan Monetary Policy Meeting Minutes

CoinDesk TV

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Bitcoin Surges as Silicon Valley Bank Customers Will Have Access to Their Money

Bitcoin (BTC) has climbed above $24,000 in the last 24 hours, as the Federal Deposit Insurance Corporation said depositors of Silicon Valley Bank would have full access to their money beginning Monday morning, after confirming a successful transfer of deposits to a new bridge bank. This came as crypto exchange Binance said it would convert $1 billion worth of Binance USD (BUSD) to bitcoin (BTC), ether (ETH), BNB coin (BNB) and other tokens to support the market.

Headlines

DYdX Passes Vote to Reduce Trading Rewards by 45%, Sending Token Up 29.89%: The DYDX token is up by 121% since the turn of the year.

MakerDAO Weighs Using Emergency Switch to Prevent Future DAI Depegging: The community proposal comes just two days after DAI followed stablecoin USDC in slipping beneath the one-dollar mark.

The Banking Crisis Is Not Crypto’s Fault: Crypto might have a banking problem, but banks don’t have a crypto problem.

Coinbase Officially Suspends Binance USD Stablecoin Trading: Coinbase CEO Brian Armstrong previously said the decision was made due to liquidity concerns.

Crypto Fund Outflows Hit Record Weekly Level: The outflows rose for a fifth consecutive week, according to a CoinShares report.