The cryptocurrency world is notorious for its volatility, with prices rising and falling steadily. However, the recent collapse of the stablecoin USDC has investors concerned that the entire market is on the verge of a catastrophic crash. Although several analysts are predicting an upcoming rebound in the crypto market, the growing FUD situation is forcing investors to liquidate their holdings to avoid massive losses.
USDC’s Dramatic Drop Sends Shockwaves Across Crypto Industry
After a massive sell-off, the global crypto market saw a broad-based rebound on Saturday morning, with Bitcoin and Ethereum prices rising 5% and 6% respectively. Nonetheless, major stablecoins USDC, DAI, and USDD have seen significant unpecking, attributed to the lingering effects of the Silicon Valley Bank crisis on the crypto market.
Amid a tumultuous week for cryptocurrencies, the loss of its peg to the US dollar by Circle’s $43 billion USDC stablecoin has left Bitcoin, Ethereum and other major cryptocurrencies set for volatility. important. For the first time since November, the total cryptocurrency market capitalization fell below $920 billion, and in the past 24 hours, more than $200 million worth of cryptocurrency-related futures contracts have fallen below $920 billion. been liquidated.
What to expect from the next market?
Even though the price of USDC has lost value, some traders are betting on a slow rebound towards the $1 mark by buying USDC at a lower price, which could translate into a potential profit of 10% if the USDC reaches parity with the dollar.
Market experts estimate that USDC will soon hit the $1 mark, as Circle has five other banks for its liquidity reserves, and its exposure of $3.3 billion out of $40 billion will not affect the market much. ‘USDC. However, top assets like Bitcoin and Ethereum are currently experiencing a short squeeze, with massive funds pouring in over the past 24 hours.
If the USDC continues to decline, it could lead to a significant downward trend in the price of Bitcoin, given that average funding rates have reached their most negative point since the FTX incident in November 2022. If Bitcoin opens a daily candle below the $19.5K level, it could trigger a deadly rally in the market, plunging several assets to December levels.
This week, the price of Bitcoin fell 10% following the collapse of the crypto-friendly Silvergate Bank. As a result, the combined crypto market lost $100 billion, and the prices of the top ten cryptocurrencies, such as Ethereum, BNB, XRP, Cardano, Dogecoin, Polygon, and Solana all saw significant declines.
Additionally, the upcoming CPI data could potentially trigger a sharp decline in the crypto market, especially if the data leads to a 50bp rate hike, which would trigger a prolonged downtrend for many assets. .