By Marcus Soterio, analyst UK based digital asset broker GlobalBlock
Although the Nasdaq rose 0.21% yesterday and both the S&P 500 and Nasdaq futures posted gains this morning, Bitcoin continues to decline. What factors contribute to this high sales?
Systemic issues in crypto infrastructure companies like Celsius
Celsius is one of the biggest creditors and they may not pay. Celsius’ liquidity on the chain has been getting healthy over the past 24 hours, as they have added bail to 3 key positions on the board. One of those positions, Maker wBTC Vault, now has a liquid value of $14k, which was once around $22,500. This is because they have paid more of their DAI debt.
Celsius’ significant exposure to stETH is associated with the size of the curve pool currently with significant uncertainty.
I think a lot of people are waiting for more information on their stETH positions, so they may have the confidence to buy again – if the Celsius deal is reached and announced, this could lead to a relief rally.
Failure of crypto hedge funds such as 3 AC (Three Arrows Capital).
This is one of the largest crypto hedge funds, and one of the largest borrowers. At its peak, it had over $5 billion in assets and hundreds of thousands of ETH. If they fail, this means that the lenders may face serious financial risk. At stake is the profit-loss gap between those who borrow and those who get to redeem their collateral.
Lenders will be forced to protect themselves by withdrawing credit from the system, resulting in the use of more crypto assets. I think probably a lot of people still need to turn it off.
The reversal of liquidity in the world market due to the proportional increase and QT
QE has boosted global markets and crypto over the past two years, but it has also meant that investors, especially riskier assets, have been forced to exit their positions. We have the Federal Reserve’s interest rate decision today at 7pm UK time. I think a more aggressive Federal Reserve may be the best way for the markets to continue QE sooner rather than later.