The cryptocurrency industry experienced its own set of failures last year when numerous internal companies and projects imploded, resulting in declining prices, countless bankruptcy filings, and, somewhat expectedly, lots of investor losses.
This year started on a positive note, but crypto has once again taken a serious hit – this time, the most apparent reason coming from outside players.
All of this has harmed the performance of bitcoin and most altcoins, resulting in yet another change in the overall sentiment.
BTC Shuttered Amid Banking Issues
The first several weeks of 2023 saw BTC finally overcoming $17,000, which propelled a mini bull run that drove the asset to and beyond $25,000 in February. After adding almost 50% in this timeframe and charting a multi-month high, the popular Fear and Greed Index skyrocketed from deep within “fear” and “extreme fear” to greed.
Yet, bitcoin couldn’t double down on its positive run, even though many industry experts suggested that the bear market was finally over and BTC could go back to charting new highs. Just the opposite, the asset stalled before it dropped back down to around $22,000.
More price declines came, with the possible reasons ranging from the US government supposedly selling seized BTC from Silkroad on Coinbase to even further interest rate hikes. Then came some less-expected issues. Silicon Valley Bank – a large commercial bank, or what bitcoin was created to fight against, collapsed on Friday after it failed to raise additional capital.
One might think at first that this would actually be beneficial for the primary cryptocurrency as it showcases that even giants from the traditional financial world could implode just as easily and violently as something like the Terra ecosystem. After all, BTC emerged following the largest US banking collapse in history to be something of an alternative. And SVB became the second loudest such explosion.
However, it turned out that some crypto firms had exposure to the failed bank. One of those names is Circle – the industry giant behind the second-largest stablecoin – USDC. As news popped out that the firm held at least $3.3 billion in SVB, the native stablecoin lost its dollar parity and plummeted to and below $0.9.
Back to Fear
All of this affected bitcoin’s price, and it dropped all the way down to $19,500 yesterday. This became its lowest position in two months. Naturally, the overall sentiment changed once again, showcased by the Fear and Greed Index.
The metric, which takes into consideration different factors, such as volatility, social media comments, surveys, etc, declined to 33 – a state of fear. Just for reference, it was above 55 in February, showing a greedy sentiment, and was around 50 last week – neutrality.
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