LBank, a global cryptocurrency exchange, has reported that Bitcoin has reached an eight-month high of $28,000, despite expectations that the recent collapse of major banks such as Silicon Valley Bank and Signature Bank would cause a valuation drop in cryptocurrencies.
LBank’s co-founder Johnason Chan and board member Czhang Lin believe that this surge in Bitcoin’s price may be due to investors seeking alternative hedging products while the banking crisis continues to be resolved. As a result, Bitcoin trading volume more than doubled compared to the previous two months.
Stablecoins were also affected by the collapse of Silicon Valley Bank, with Circle’s USDC, the second-largest stablecoin by market cap, briefly losing its peg with the dollar. However, even with other stablecoins beginning to lose their dollar peg, this did not spark a full-on sell-off, and investors have turned back to Bitcoin.
Chan adds that there is another reason for the surge, which is a short squeeze, where traders liquidated $300 million worth of crypto positions, with $160 million in short positions.
Futures play a crucial role in the crypto market, sometimes leading to market trends. After things cool off, prices will probably temporarily fall back to their usual spot.
Lin highlights that while the Bitcoin rally reflects people’s loss of confidence in the central banking system, the macroeconomics are still weak and the sum of capital injection on-chain is relatively low. Digital asset investment products’ outflow is continuing, and the drawbacks need to be understood.