Bank

Bitcoin futures premium falls to lowest level in a year, triggering traders’ alerts

On March 12, Bitcoin futures traded 5.5% below regular spot exchanges, causing volatility in derivatives markets.

The price of Bitcoin (BTC) increased by 14.4% between March 12-13 after it was confirmed that financial regulators had rescued depositors in the failing Silicon Valley Bank (SVB). The intraday high of $24,610 may not have lasted long, but $24,000 represents a 45% increase year-to-date.

On March 12, U.S. Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg issued a joint statement to reassure SVB depositors.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), an intervention designed to compensate depositors for losses incurred by the previous management. Signature Bank was one of the most prominent financial institutions serving the cryptocurrency industry alongside Silvergate Bank, which announced its voluntary liquidation last week.

To avert a larger crisis, the Fed and Treasury devised an emergency program to supplement all deposits at Signature Bank and Silicon Valley Bank with funds from the Fed’s emergency lending authority. According to the regulators’ joint statement, “no losses will be borne by the taxpayer,” although the strategy for deploying Treasury assets is questionable.

The stablecoin USD Coin (USDC) also caused significant turmoil in the cryptocurrency industry after breaking below its 1:1 peg with the U.S. dollar on March 10. The fear grew after the issuing management company Circle confirmed that $3.3 billion in reserves were held at Silicon Valley Bank.

Such an unusual movement caused price distortion across exchanges, prompting Binance and Coinbase to disable the automatic conversion of the USDC stablecoin. The decoupling from $1 bottomed near $0.87 in the early hours of March 11 and was restored to $0.98 after the FDIC’s successful intervention in the SVB crisis was confirmed.

Let’s take a look at Bitcoin derivatives metrics to see where professional traders stand in the current market.

Bitcoin futures metrics flipped to extreme fear

Bitcoin quarterly futures are popular among whales and arbitrage desks. These fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts in healthy markets should trade at a 5-to-10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Bitcoin 3-month futures annualized premium. Source: Laevitas.ch*

The chart shows traders had been neutral-to-bearish until March 10 as the basis indicator oscillated between 2.5% and 5%. However, the situation quickly changed in the early hours of March 11 as the stablecoin USDC decoupled and cryptocurrency exchanges were forced to change their conversion mechanisms.

Consequently, the Bitcoin three-month futures premium turned into a discount, otherwise known as backwardation. Such movement is highly unusual and reflects investors’ lack of trust in intermediaries or extreme pessimism towards the underlying asset. Even as the USDC stablecoin price approaches $0.995, the current 0% premium indicates a lack of leverage buying demand for Bitcoin via futures instruments.

Crypto-fiat gateways are key to reclaiming improved market dynamics

By reclaiming the $24,000 support, Bitcoin has restored levels unseen since the Silvergate Bank stock price collapse on March 1 after the delayed filing of its annual 10-K financial report. Moreover, crypto exchanges and stablecoin providers were forced to suspend U.S. dollar deposits, with the closure of Signature Bank affecting Okcoin.

Banking options for crypto firms, including exchanges, are likely to become more limited as traditional banks remain wary of the sector. According to some analysts, U.S. regulators are purposefully discouraging major banks from doing business with cryptocurrency exchanges.

Fiat gateway on and off ramps are critical for stablecoins, market markers and cryptocurrency exchanges for a variety of reasons. The ability to convert Bitcoin to cash and vice versa is critical for their day-to-day operations, so the longer it takes to find new banking partners, the more difficult it is for stablecoins to allow redemptions and exchanges in order to maintain a high level of liquidity.

Derivatives metrics may have recovered from the initial banking crisis contagion risk, but they still indicate Bitcoin bulls’ lack of confidence in a long-term recovery.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

US bank woes? Silicon Valley Bank stocks plunge 1 day after Silvergate downfall

Concerns have been raised around the financial health of the tech-focused bank, which services the likes of crypto-friendly VCs such as Sequoia and a16z.

Fears have been heightened over the future of another United States bank this week after Silicon Valley Bank (SVB) announced a significant sale of assets and stocks aimed at raising additional capital.

However, some investors may be concerned that not all is well at the tech startup and VC-focused bank, particularly given the closure of crypto bank Silvergate just a day earlier. Shares in Silicon Valley Bank collapsed over 60%, wiping some $80 billion in value from the bank’s shares.

SVB is one of the top 20 largest banks in the United States and provides banking services to the likes of crypto-friendly venture firms Sequoia and Andreessen Horowitz (a16z).

In a March 8 financial update, it disclosed it sold $21 billion worth of its securities holdings for a $1.8 billion loss to shore up its balance sheet.

It also raised $500 million from venture firm General Atlantic and is seeking to raise another $1.75 billion in sales of its shares, for a total of $2.25 billion.

It said the sale was made as it expects “continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses.”

The release of the financials, however, plunged SVB’s stock price by 60% on March 9, according to Google Finance, with investors concerned about the bank’s financial position. It’s also seen a further 23% decline in after-hours trading.

*SVB’s five-day chart shows the sharp one-day price decline from around $265 to trading at nearly $80 after hours on March 9. Source:* *Google Finance*

According to a March 9 report from The Information, SVB chief Greg Becker told investors to “stay calm” and said the bank has “ample liquidity to support our clients with one exception: If everyone is telling each other SVB is in trouble, that would be a challenge.”

In a stakeholder letter, Becker reaffirmed that the bank was “well-capitalized,” with “one of the lowest loan-to-deposit ratios of any bank of our size” and expects to reinvest the capital from the sale into “more asset-sensitive, short-term” securities.

Many have shared concerns regarding the potential knock-on effect if SVB’s clients were to instigate a bank run.

On Twitter, founders and tech executives however aired their support for the bank and urged others not to panic.

Mark Suster of Upfront Ventures tweeted on March 9 that “more in the VC community need to speak out publicly to quell the panic about [SVB].”

3/ I believe the biggest risk to startups AND VCs (and to SVB) would be a mass panic. Classic “runs on the bank” hurt our entire system. People are making public jokes about this. It’s not a joke, this is serious stuff. Please treat it as such

— Mark Suster (@msuster) March 9, 2023

“I believe they could only fail if everybody panics so I would urge calm decisions based on facts,” he added.

Reacting to the news, Zak Kukoff, principal at VC firm General Catalyst, said the bank had “consistently gone out of their way” for startups, adding that “now is the right time to support them.”

I will say – SVB has consistently gone out of their way to do the right thing for startups and for the ecosystem. Now is the right time to support them

— Zak Kukoff (@zck) March 9, 2023

The uncertainty over SVB follows only a day after Silvergate said it would “wind down operations” and liquidate its crypto-friendly bank.

In a March 8 announcement, Silvergate Capital Corporation said the decision to shutter operations was “in light of recent industry and regulatory developments.”

Silvergate was one of the major banking partners for many crypto firms but concerns about its solvency emerged following an announcement it would delay the filing of its annual 10-K report by two weeks. The document provides an overview of a company’s financial situation.

‘Do not delay’ — ASIC warns Aussies to look for 10 signs of a crypto scam

The list comes out as part of Australia’s 2022 Scams Awareness Week.

Australia’s market regulator has released a list of the “top-10 ways to spot a crypto scam,” amid a detected rise in crypto-related investment scams this year.

The Australian Securities and Investment Commission’s (ASIC) public advisory statement was published as part of Scams Awareness Week 2022, an initiative that teaches Australians how to identify all forms of scams. The campaign takes place between Nov. 7 to 11.

ASIC said that Australians had already lost more through “investment scams” in 2022 than the total $701 million figure in 2021, while ASIC Deputy Chair Sarah Court attributed cryptocurrencies to the steep incline in investment scams over the last two to three years:

“The main driver of the increase was cryptocurrency investment scams, where losses increased by 270%. The ACCC have advised that losses to crypto scams have increased further in 2022.”

“Given this concerning trend, we want to arm Australians with the information they need to protect themselves from scammers,” she added.

As part of the advisory, ASIC stated that cryptocurrency scams fall into three categories. The first relates to scams where the victim believes to be investing in a legitimate asset. However, the crypto app, exchange, or website turns out to be fake.

The second scam involves fake crypto tokens used to facilitate money laundering activities, while the third type of scam involves the use of cryptocurrency to make fraudulent payments.

ASIC says top signs of a crypto scam include “receiving an offer out of the blue,” “fake celebrity advertisements” and being asked by a “romantic partner you only know on-line” to send money in crypto.

Other red flags include being asked to pay for financial services in crypto, being asked to pay more money to access funds, withholding investment earnings “for tax purposes” or being offered “free money” or “guaranteed” investment returns.

The markets regulator also said it was common for scammers to pressure victims into transferring crypto to their website. To prevent this issue, ASIC also advised crypto investors not to use web apps that aren’t listed on Apple Store or Google Play.

Other things to look out for is if “strange tokens appear in your digital wallet,” said ASIC.

If scammed, Court strongly advised victims not “to send any more money” to the scammer and to “block all contact” from them if their identity is known:

“Do not delay. Contact your bank or financial institution immediately to report the scam. Ask them to stop any transactions. Also, warn your family and friends so they can watch out for potential follow-up scams.”

A Nov. 7 report from the Australian Competition & Consumer Commission (ACCC) predicted Australian-targeted scam losses will reach $4 billion Australian dollars by the end of 2022.

The ACCC has received $10 million in seed funding as part of its budget to build a National Anti-Scam Center to support the community in its fight against cybercriminals, which was confirmed by Financial Services Minister Stephen Jones on Nov. 7.

David Koch, the host of the Australian breakfast show Sunrise, has called for the ACCC to demand more accountability on social media platforms like Facebook, Instagram and LinkedIn over the scam-like content that can be found on its platforms.