Crypto market cap reclaims $1T, and derivatives point to further upside

Market Analysis

The total crypto market capitalization increased by 26% in seven days, reaching $1.16 trillion on March 17. Bitcoin (BTC) was the biggest winner among the top 20 coins, up 31.5%, though some altcoins gained 50% or more during the period.

The surge in cryptocurrency prices occurred as the United States Federal Reserve was forced to lend banks $300 billion in emergency funds. According to PBS NewsHour, nearly half of the money went to failed financial institutions Silicon Valley Bank and Signature Bank and was used to pay uninsured depositors. The remaining $153 billion was obtained through a long-standing program known as the “discount window,” which allows banks to borrow funds for up to 90 days.

While appearing to protect the banking sector, additional funding for the Federal Deposit Insurance Corporation and credit facilitation using Fed resources ultimately creates a “false sense of confidence,” according to activist billionaire investor Bill Ackman.

The $30 billion plan devised by U.S. regulators to avoid a major liquidity crisis in First Republic Bank “raised more questions than it answers,” said Ackman, who manages the hedge fund Pershing Square. Furthermore, Ackman stated that “half measures don’t work when there is a crisis of confidence.”

Billionaire Warren Buffett is on the losing side of the bet

As the banking crisis worsened, Warren Buffett, the co-founder and largest shareholder of Berkshire Hathaway — a $650 billion financial conglomerate — saw his holdings rapidly deteriorate. Berkshire Hathaway, for example, is the largest holder of Bank of America stock, which has fallen 15.5% year-to-date. This position alone has cost Buffett’s investment vehicle $5.2 billion.

Buffett, a well-known cryptocurrency critic, has stated that he has no interest in Bitcoin, even if the entire float is offered at $1,300. The 91-year-old, with a net worth of around $102 billion, claimed that Bitcoin doesn’t produce anything whereas farmland and residential real estate do.

However, Bitcoin’s price increased by 31.5% in the six months preceding March 17, while Berkshire’s stock increased by 5.8%. So, for the time being, the so-called “rat poison” — as Buffett once described Bitcoin — is outpacing his own financial management firm.

$1 trillion market capitalization support quickly restored

Let’s look at the performance of the top 80 cryptocurrencies by market capitalization to see if the surge above the $1 trillion mark has boosted the confidence of altcoin investors.

Conflux’s CFX gained 97.6% after KuCoin Ventures announced a $10 million investment in stablecoin issuer and blockchain-based payment service provider CNHC, which is available on the Ethereum and Conflux networks.

Stacks’ STX (STX) rallied 75.7%, as the network is scheduled to undergo an upgrade on March 20 introducing Stacks 2.1, with new features and improvements.

Immutable X’s IMX rose 71.7% following a much-anticipated announcement of an upcoming partnership reveal scheduled for March 20.

Options traders are extremely confident about market conditions

Traders can gauge the market’s sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A put-to-call ratio of 0.70 indicates that put option open interest lags behind the greater number of call options. In contrast, a 1.40 indicator favors put options, which is a bearish sign.

Related: Crypto Biz — SVB collapses, USDC depegs, Bitcoin still up

Since March 12, the demand for neutral-to-bullish call options has increased, indicating the growing risk appetite of derivatives traders. The movement peaked on March 17, when the volume of call options exceeded the volume of protective put options by a 3:1 ratio.

The gap favoring call options has stabilized at 2:1, indicating that professional investors are unconcerned following the March 17 rejection of the $1.16 trillion market capitalization level. In the end, data indicates a strong conviction for Bitcoin’s support at $26,000, so bulls are in a stronger position to continue their rally.

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

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