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(Kitco News) – It’s a 2008 redux across financial markets as the failure of the Silicon Valley Bank (SBV) – the 16th largest bank in the U.S. by assets – has plunged numerous industries into chaos, with VC firms and startup companies now scrambling to find a way to pay their employees and fund their operations.
The collapse of SBV represents the second-largest banking collapse in U.S. history behind Washington Mutual and has sparked declines across financial markets as the list of threats, from rising interest rates to persistent inflation, continues to push investors to the safety of cash. At the close of markets, the S&P, Dow and Nasdaq all finished in the red, down 1.45%, 1.07%, and 1.76%, respectively.
Data from TradingView shows that Bitcoin (BTC) bears got an early jump on Friday’s developments, breaching below the psychologically important $20,000 level in early trading hours and driving the top crypto to a daily low of $19,628 before bulls managed to bid the price back above $20,000 in the afternoon.
BTC/USD 4-hour chart. Source: TradingView
“March Bitcoin futures prices hit a two-month low in early U.S. trading Friday,” Kitco senior technical analyst Jim Wyckoff wrote in his morning BTC update.
“Bears have the near-term technical advantage amid a fledgling price downtrend in place on the daily bar chart,” Wyckoff observed, adding, “Bears have momentum to suggest still more sideways-lower trading in the near term.”
Collateral damage from the collapse of SVB
The widespread concern sparked by SVB’s demise was succinctly put into context by David Lifchitz, managing partner and chief investment officer at ExoAlpha, who noted in a conversation with Kitco Crypto that “The big problem with SVB is not only the bank failure in itself, but all of the non-linear consequences that will come next week when all of their clients have their assets whipped out. How will all of their start-up clients be able to pay their employees next week and moving forward?”
SVB is the bank that many tech start-ups and VC firms use for their treasury, so the big question is how all these companies will be able to function in the immediate near future, Lifchitz noted. “The problem with banks’ failures is that they are non-linear, meaning that they tend to put in motion much more than their own demise.”
The move by the FDIC to step in may help partially pay back SVB depositors, but there is a good chance that mass layoffs may come for many of these companies, if not outright closure, Lifchitz warned.
As for the crypto market, and more specifically Bitcoin, Lifchitz said that the top crypto is trying to find support just below $20,000, “but it wouldn’t take much here to push it back to $19,000 and possibly $17,500 should the SVB situation exacerbate next week.”
To the upside, Lifchitz identified $23,000 as the new resistance level for BTC, but warned “it may take some time to get back there, and a breakout above $25k looks even more remote today unless the FED makes a U-turn on rates, which is not in their intentions as per its president Jerome Powell’s speech a couple of days ago.”
For those who were unable to sell ahead of the drawdown experienced over the past two days, “it’s a bit too late to sell here, even if a little bit more downside is still possible,” Lifchitz said. “A run back toward $23k from here should be seen as an opportunity to lighten up, and a break below $19k is a definitive sell signal. Only a clean break above $25k-ish should be seen as the beginning of a new bull move toward $30k.”
One bright spot in a sea of red
The altcoin market has been hard hit by the weakness in Bitcoin, with the majority of tokens in the top 200 in the red for the day. Even among the gainers on the 1-day chart, the fact that their seven-day charts show double-digit losses speaks volumes about the struggles that the crypto market is facing.
Daily cryptocurrency market performance. Source: Coin360
The one bright spot worth mentioning is Kava (KAVA), a decentralized bank for digital assets that provides its users with access to stablecoins, loans, and interest-earning opportunities for their crypto. KAVA is up 11.35% on the daily chart and 16.82% on the weekly chart as it has attracted the attention of crypto-investors who are looking for a crypto-native decentralized banking platform.
The overall cryptocurrency market cap now stands at $932 billion, and Bitcoin’s dominance rate is 41.1%.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
