Liquidation, regulation and other negative factors have suppressed Bitcoin, and it is still holding the pressure of $20,000

Affected by multiple negative news such as the liquidation of crypto bank Silvergate Bank and the US regulators' lawsuit against KuCoin , the crypto market sentiment has deteriorated.

Bitpush terminal data shows that as of the time of writing, Bitcoin (BTC) has fallen more than 8% in 24 hours, falling below $21,000 for the first time in seven weeks, and fell to a local low of $20,050 during the session, the lowest level since January 14, and then rebounded slightly to above $20,250. Ethereum and altcoin markets were also affected, with Ethereum falling 8% to $1,437, Binance's BNB falling 6%, Ripple 's XRP token falling 7.54%, and Polygon 's MATIC falling 8.17%.

Coinglass data shows that in the past 24 hours, the amount of Bitcoin liquidations exceeded US$90 million, of which more than 95% were long positions.

BitPush previously reported that Silvergate Capital (SI) announced on Wednesday that it intends to end its business and voluntarily liquidate Silvergate Bank, and one of the most famous banks in the crypto space completely collapsed. The bank expects to repay all deposits in full, and KBW analysts said in a report last night that as of December 31, Silvergate Bank had excess cash ($4.6 billion) relative to cryptocurrency deposits ($3.8 billion).

Regulatory crackdown

The crypto market decline also coincided with news Thursday afternoon that New York Attorney General Letitia James sued KuCoin, accusing the crypto exchange of offering unregistered securities and commodities. The lawsuit also alleges that Ethereum, Luna, and TerraUSD are securities.

It is worth noting that there is disagreement at the U.S. federal level on whether Ethereum is a security or a commodity, with U.S. Securities and Exchange Commission ( SEC ) Chairman Gary Gensler suggesting that he considers it an unregistered security, while Commodity Futures Trading Commission ( CFTC ) Chairman Rostin Behnam considers it a commodity.

Recent enforcement actions by U.S. regulators against Paxos and B USD , as well as the SEC’s crackdown on centralized staking, have hindered the development of continued bullish momentum across the market. The crypto regulatory environment remains unclear, and uncertainty often leads to market volatility.

The negative effects of Silvergate's collapse

The collapse of a former pillar of the industry has dampened banks’ enthusiasm for supporting the crypto ecosystem. “Market sentiment does seem to have weakened, with both funding rates and Binance’s annualized base rate trending lower,” Noelle Acheson, former head of market insights at Genesis, wrote in a daily newsletter.

Traditional banks that want to get involved in crypto businesses have to face regulatory uncertainty. Edward Moya, senior market analyst at foreign exchange market maker Oanda, wrote in a report on Thursday: "The crypto industry is now trying to find a new service company to help with payments and other deposit-related services. Considering the impact of Silvergate Capital, this is still a difficult environment for crypto."

If more and more middlemen like Silvergate get into trouble, it will make it difficult for crypto companies to expand their deposit and withdrawal businesses. Stefan Rust, CEO of economic data aggregator Truflation, commented: "The Silvergate crisis will slow down the entry of institutions into the market because they do not have access to deposits and withdrawals that can be expanded quickly. It will drive more crypto businesses to leave the United States."

Expectations of a 50 basis point rate hike are rising

Investors have increased their expectations for future rate hikes in the United States. Earlier this week, Federal Reserve Chairman Powell warned that the central bank may increase interest rate hikes, and interest rates are likely to be higher than previously expected. Although Powell stressed that no decision has been made on the March meeting, expectations of a 50 basis point rate hike at the March meeting are heating up after a series of strong economic data were released recently.

The ADP jobs report and Wednesday's JOLTS data suggested the U.S. economy is resilient, with initial jobless claims rising more than expected in the week ended March 4, suggesting the labor market may be starting to slow. Friday's closely watched nonfarm payrolls report is also a key variable.

As of March 9, traders were pricing in about a 75% chance of a 50 basis point rate hike, according to CME Group ’s FedWatch tool.

The crypto market remains highly correlated with the Dow Jones and S&P 500. The market rally in early 2023 was based on investors' expectations that the Federal Reserve would pause its rate hikes in the summer or sometime this year, and Powell's latest remarks made it clear that this was not the case, so it is not surprising that the crypto and U.S. stock markets have plummeted.

What's next?

Edward Moya, senior market analyst at foreign exchange market maker Oanda, predicted that Bitcoin could see further selling pressure, testing the key resistance level of $20,000.
Crypto analyst Ann Mugoiri believes that BTC's daily chart shows a bearish crossover with the Moving Average Convergence Divergence (MACD) indicator, suggesting more losses in the near term. The relative strength index (RSI) is still moving lower and is currently at 30.15. Any further downward pressure could cause it to fall even lower.

The 50-day exponential moving average (EMA) is currently at $20,540, while the 200-day EMA is around $20,543, suggesting that the bulls need to take control of the market soon and bring some buying pressure, otherwise the price may continue to move lower.

Overall, the technical trend chart analysis shows that bears are still in control of the market and will remain dominant if no bullish momentum is seen in the short term. Bitcoin's support level is $20,837. If it falls below this level, it may indicate that BTC will fall further. The upward resistance is located at the $22,115 level. If it can break through this level, it may continue to rise.