Share:
  • Traders are gearing up for Jerome Powell’s hearing before the US Senate committee for the Semiannual Monetary Policy Report.
  • The cryptocurrency ecosystem is expected to come up during the discussion as crypto prices failed to recover despite Monday’s stock market rally.
  • The crypto market is currently exposed to FUD around the Silvergate crisis.

The hearing on the Semiannual Monetary Policy Report to the Congress will feature Federal Reserve chair Jerome Powell, who will be testifying about the state of the United States economy and the central bank’s monetary policy outlook for 2023. The hearing is scheduled to start at 15:00 GMT, and could have a big impact in all financial markets, including cryptocurrencies.

Silvergate FUD is deeper than it appears

Following a relatively bullish two months of 2023, the crypto market is currently exposed to ‘Fear, Uncertainty and Doubt’ (FUD) after the Silvergate Bank crisis that saw the likes of Coinbase, Circle, Paxos, Galaxy Digital and others terminate partnerships with the bank. This long list of lost clients suggests why Silvergate’s current position is terrifying. Consequently, Silvergate’s stock price plummeted by 66% between March 1 and March 3.

The fall from glory comes after revelations of federal investigators probing Silvergate’s involvement in the FTX collapse. Some of the bank’s customers were alarmed by the FTX fall, leading to an $8.1 billion bank run that wiped out 60% of its deposits in a single quarter. Citing the Wall Street Journal:

[The situation was]….worse than that faced by the average bank that closed during the Great Depression."

Based on Silvergate’s quarterly statements, the bank’s Q3 results were a total disaster recording a $1 billion loss. In a March 1 filing, Silvergate revealed an unexpected regulatory document alleging that “the quarterly numbers were actually significantly worse,” casting doubts on whether the bank will be able to continue operating.

Commenting on the matter, Ava Labs president John Wu said:

If Silvergate falls out of business, it will force funds and market makers further offshore. The difficulty of obtaining actual cash money, or liquidity in financial parlance, is the problem. Transactions become more challenging when there is less liquidity.”

Wu’s comments reflect that very few institutions deal with crypto. In fact, besides Silvergate, only one other US bank provides access to banking services that move as fast as cryptocurrency.

Crypto on Jerome Powell’s testimony agenda

Despite the stock market rally on Monday, cryptocurrency prices did not recover. Hodlers of top market capitalization assets like Bitcoin (BTC) and Ethereum (ETH) are skeptical after markets failed to rally following the February 21 peak.

Nevertheless, traders remain alert for Jerome Powell’s hearing before the US Senate Banking, Housing and Urban Affairs Committee. Notably, the crypto ecosystem is among the expected topics for discussion at the hearing due to the numerous scams and frauds that have taken place over the last year. The collapse of TerraLabs set off a chain reaction that led to the subsequent insolvency of major players in the industry, including Three Arrows Capital, FTX, BlockFi and so on. 

Hence, the committee is likely going to bring up the matter of crypto regulation, among other things.

As was the case for all past statements by the Fed president, Tuesday’s hearing has sparked much interest among traders and investors who speculate on increased volatility. After the FTX implosion, experts color-coded the recovery of the cryptocurrency market with a resumed correlation between Bitcoin (BTC) price and the S&P 500 Index.

Notwithstanding, the Silvergate crisis has hugely impacted the crypto playing field, so much that the sentiment has shifted from bullish to neutral.

Based on on-chain data, before the Silvergate-inspired FUD debacle, most traders traded long positions on crypto assets. However, despite such a standing and the latest rally in stock prices, there have been minimal (if any) signs of cryptocurrency price recovery. This is shown by the S&P 500 versus Bitcoin price divergence currently being at the highest since the November collapse of Sam Bankman-Fried’s crypto empire.

Nevertheless, any positive hints from Powell’s hearing could fuel a leap in stock markets and crypto prices in tandem. If not for a direct dovish mention, a minor positive comment like “disinflation” or dissipating the hawkish idea of the interest rate hike pace in the upcoming FOMC Meetings could fuel a rally for risk-off markets. As FUD has already settled in, therefore, Santiment metrics point to increased probabilities of price bounces if the hearing goes well.

Market participants will also look for any notable progress in the case between the US Securities and Exchange Commission (SEC) and Grayscale. 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

Shiba Inu inspired meme coin BONE notes first rise following the 55% crash in two months

Shiba Inu inspired meme coin BONE notes first rise following the 55% crash in two months

Bone ShibaSwap, also known as BONE, is one of the few meme coins that had a positive run on Monday. The meme coin is best known for being a token of the Shiba Inu ecosystem but is slowly emerging into an entity of its own, provided it can attract enough users to fuel its long overdue recovery. 

More Bone News

Binance reopens Belgium operations after three months of suspension by FSMA

Binance reopens Belgium operations after three months of suspension by FSMA

Binance has resumed operations in Belgium, around three months after suspension. An earlier report indicated that the Belgian regulatory body, Financial Services and Markets Authority (FSMA), instructed Binance to halt operations in the country beginning June 23 for violating laws.

More Cryptocurrencies News

Optimism, YGG, AGIX prices ready for impact with almost $40 million worth in cliff token unlocks this week

Optimism, YGG, AGIX prices ready for impact with almost $40 million worth in cliff token unlocks this week

Optimism, Yield Guild Games, and SingularityNET ecosystems have massive token unlocks slated for later this week. Up to 12.42 million YGG tokens will be unlocked on September 27, a day before 9.68 million AGIX tokens are unleashed to the market.

More Cryptocurrencies News

Bitcoin and other crypto asset funds could grow by 1,200% by 2028: Bernstein Research

Bitcoin and other crypto asset funds could grow by 1,200% by 2028: Bernstein Research

Investments in crypto assets have been a dicey move, especially considering the recent market conditions. However, the optimism surrounding their future has been considerably supported by many individuals. Losing this opportunity could also scale your efforts back by over five years.

More Bitcoin news

Bitcoin: BTC downside likely after 20-week EMA culls bulls

Bitcoin: BTC downside likely after 20-week EMA culls bulls

Bitcoin (BTC) bearish price fractal, as discussed in a previous article, is underway, but the lack of volatility is causing ambiguity and doubt. Regardless, BTC might see a bit of an upside before the long-term bearish scenario plays out.

Read full analysis

BTC

ETH

XRP