“The Fed bailout for depositors has alleviated some of the fears surrounding contagion risk, which resulted in a short squeeze,” Martin Leinweber, digital assets product specialist at MarketVector Indexes, told CoinDesk.over the course of the day. Leinweber noted that “the majority of these placed on Friday when concerns were heightened.” These types of short squeezes tend to push prices higher.
Yet MarketVector’s Leinweber said that despite temporary bailout relief, sentiment remains “apprehensive and cautious.” He sees concerns raised over “possible further banking fallouts”and businesses that “are industry critical due to the inability to efficiently manage cash flow.” “Bears have voiced their major points of concern, including that none of the policies address the fundamental duration mismatch problem that many of these financial institutions have,” he said, adding: “The ability to borrow secured from the Fed at par only helps in a distress situation and does not address the mismatch in assets/liabilities and over-reliance on zero-interest large deposits.”The Tie, a provider of information services for digital assets, struck a cautiously optimistic note.
“The loss of Silvergate, SVB and Signature is devastating for US-based crypto companies,” Frank wrote. “That said, the crypto market has at least temporarily responded to the bailouts well. In light of the uncertainty surrounding banking in the US, the narrative of Bitcoin as a hedge and safehaven has gained steam.”
Frank added: “While short-term positive, there are still many long-term macro factors to be wary of. US regulators are clearly trying to de-bank crypto, the macro environment does not look great, and major financial institutions went under. If crypto - and in particular Bitcoin - is going to continue to recover, we will likely need to see widespread support for this emerging narrative similar to what we saw in 2020/2021 with the Bitcoin halving/inflation hedge narrative.
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