Friday, 17 March 2023 / Published in Forex Perception

The common currency advances to $1.0650 against the U.S. dollar on Friday morning benefiting from the decision of the European Central Bank to proceed with a further 50 bps rate hike to curb inflation, signaling also that it is ready to supply liquidity to banks if needed, amid recent turmoil in the U.S. and European banking sector.

On the recent turbulent economic and banking environment, the European Central Bank went ahead with a well-expected 50-bps rate hike at its policy meeting on Thursday, sending the deposit facility rate to 3% to fight the persistent inflation in the Eurozone, which stood at 8.5% in February, well above the ECB’s target of 2%.

The ECB revised its inflation expectations, projecting headline inflation averaging 5.3% this year, followed by 2.9% in 2024. In December, the bank had projected a 6.3% inflation figure for 2023 and a 3.4% rate in 2024.

Since inflation across the 20-member region remains sharply above the targeted level of 2%, ECB acted aggressively by lifting its main rate from -0.50% last summer to the current 3% level.

Hence, the risk-sensitive Euro gets a further boost from the recent weakness of the U.S. dollar as risk sentiment improved after U.S. authorities and 11 large banks moved to ease the stress on the financial system by injecting $30 billion in deposits into First Republic Bank.

The rescue move was necessary to stop a spreading panic among depositors in the banking sector triggered by the collapse of two other mid-size U.S. banks, the Silicon Valley Bank and Signature Bank over the past week.

Meanwhile, Euro was also affected positively yesterday after news that the embattled Switzerland-based Credit Suisse would borrow up to $54 billion from the Swiss National Bank, easing-for the moment- fears about the health of Europe’s banking sector.

ECB policymakers sought to reassure investors that eurozone banks were resilient and that if anything, the move to higher rates should bolster their margins.

Wednesday, 15 March 2023 / Published in Forex Perception

Bitcoin surged to its highest level since June 2022 and just before its pre-FTX bottom, climbing as high as $26,500 on Tuesday morning, extending its recent rally in response to the brewing financial crises and bank collapses.

Bitcoin’s market cap was last at $501.95B or 44.52% of the total cryptocurrency market cap, while the price is still down 62% from its all-time high of $69,000 set on November 10, 2021.

Like Bitcoin, Ether, the second largest in value digital coin gained 11% yesterday, trading as high as $1,780 (2023 peak) before retreating to the current levels of $1,700, waiting for the next price catalyst to move either side.

The move upwards pushed Ethereum’s market cap up to $213.47B, or 19% of the total cryptocurrency market cap, while the price is still down 64% from its all-time high of $4,864 set on November 10, 2021.

Both Bitcoin and Ethereum gained more than 20% since last Friday, when U.S. regulators shut down Silicon Valley Bank and Signature Bank, sending investors to the decentralized currencies for safety.

Bitcoin, which started 2023 at around the $16,500 mark, has risen over 50% so far in the year, while Ether gained 45% year to date, starting the year at around $1,200.

Following the ongoing banking crisis and the growing stress for the financial system, many investors have turned bullish on cryptos as they believe that Federal Reserve could pause or soften interest rate hikes to prevent further economic damage.

In such a case, the U.S. dollar could have weakened from the current levels, benefiting dollar-denominated digital currencies such as the BTC/USD or ETH/USD pairs, and improving the appetite for risk assets like cryptocurrencies.

Some crypto enthusiasts believe that cryptocurrencies will shine again, following the recent US banking kerfuffle, despite a different cause for concern; maybe or-, especially Bitcoin, since it was created for a time like this, as it was inspired by the 2008 financial crisis, launching in January 2009. Cryptocurrency prices skyrocketed also during the Cyprus banking crisis, nearly 10 years to the date. 

Thursday, 09 March 2023 / Published in Forex Perception

Cryptocurrencies continued their downward momentum this afternoon after the crypto lender Silvergate Capital said on Wednesday it intends to wind down operations and voluntarily liquidate Silvergate Bank in an orderly manner and in accordance with applicable regulatory processes.

The news of its decision to liquidate dealt a fresh blow to cryptocurrency prices, pushing Bitcoin and Ethereum down to a one-month low of $21,500 and $1,530 respectively, while the smaller in-value token Solana broke below $19, and the metaverse-led Mana fell to $0.55, more than 25% from their yearly highs.

California-based Silvergate offered traditional banking services to several big crypto exchanges, and it served as one of the two leading banks for crypto companies with over $11 billion in assets, along with the leading crypto-friendly New York-based Signature Bank with over $114 billion assets.

The crypto lender decided to shut down its Bank operations and proceed with a voluntary liquidation of the assets on Wednesday, adding in a statement that all deposits will be fully repaid, according to a liquidation plan.

It had suffered catastrophic losses on its portfolio of bonds when the mass flight from crypto as an asset class in the wake of FTX’s collapse caused Silvergate’s crypto clients to pull their funds from the bank to meet redemption requests from their own customers.

The liquidation comes less than a week after Silvergate discontinued its payments platform known as the SEN-Silvergate Exchange Network (announced on March 03, 2023), which was one of its core offerings.

The platform disconnection followed the postponement of the filing of its annual 10-K financial report for 2022 on March 01, a document required by the Securities and Exchange Commission that provides a comprehensive overview of a company’s business and financial condition.

Since the news of the late 10-K filing on March 1, Silvergate’s stock price has fallen over 60% to a record low of $4.90 on Wednesday, nearly 98% down since its all-time high of $219, hit on November 14, 2021.

Friday, 03 March 2023 / Published in Forex Perception

The two largest digital currencies Bitcoin and Ethereum plunged by nearly 5% to as low as $22,300 and $1,570 respectively on Friday morning, posting their largest one-day percentage loss since early February, as crypto investors fear that a possible collapse of the cryptocurrency bank Silvergate Capital could prove costly for the rest of the industry after delaying its annual report.

Bitcoin’s market cap was last at $433B or 47% of the total cryptocurrency market cap this morning, while Ethereum’s market cap totalled $191B or 18% of the total cryptocurrency market value.

The sell-off across the crypto board started after Silvergate Capital announced on March 1 that it would postpone the filing of its annual 10-K financial report, which has many fearing the cryptocurrency bank may be on the brink of a bankruptcy filing.

A 10-K report is a document required by the Securities and Exchange Commission that provides a comprehensive overview of a company’s business and financial condition. The crypto bank stated that it would need an additional two weeks to complete the report for the 2022 fiscal year.

California-based Silvergate delayed its annual report and said it had sold additional debt securities – investments that can include bonds and notes – to repay debts this year and was evaluating the impact of these events on “its ability to continue as a going concern.”

Since the news of the late 10-K filing on March 1, Silvergate’s stock price has fallen a massive 57% to a record low of $5.72. The stock is now down over 97% since its all-time high of $219, hit on November 14, 2021.

Silvergate Capital share, Weekly chart

Silvergate, a major player in the crypto ecosystem, is a fintech firm that provides financial infrastructure solutions and services to some of the largest cryptocurrency exchanges, institutional investors, and mining companies in the world.

It also offers a 24/7 payments platform, named Silvergate Exchange Network, which has reportedly processed over $1 trillion in transactions since 2017.

Concerns about Silvergate’s potential financial troubles first surfaced in Q4 2022, when it reported a net loss of $1 billion as a result of the shock collapse of FTX in November. The exact dealings between Silvergate and FTX have been subject to a probe by the United States Department of Justice recently, although there’s been no accusation of wrongdoing at this point.

Despite many firms recently claiming not to have exposure to Silvergate, the bank still processed over $3.8 billion in customer deposits in Q4 2022. This was a steep fall from $11.9 billion in Q3 2022, according to Silvergate.

The firm also provides a stablecoin infrastructure platform, digital asset custody management, and collateralized lending services to several institutional players in the cryptocurrency industry.

Despite the large network effects, the late 10-K filing appears to have had a consequential effect on its partnerships.

Within 24 hours of the late 10-K filing, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos confirmed that they will scale back their partnerships with the cryptocurrency bank in some capacity.

Tuesday, 28 February 2023 / Published in Forex Perception

The Pound Sterling rebounds to nearly $1,2080 on Tuesday morning following the new trade deal between the U.K. and the European Union, which will likely remove some trade frictions between the two parties after Brexit.

On early Monday, the GBPUSD pair bounced 1% from the yearly lows of $1,1950 to the current highs of $1,2080 following the announcement by British Prime Minister Rishi Sunak that the U.K. has struck a deal with the European Union on post-Brexit trade rules for Northern Ireland.

The trade deal, known as the Windsor Framework, seeks to resolve the tensions caused by the trading rules for the only part of the U.K. that has a land border with the EU, and it will likely pave the way for a better relationship between London and Brussels.

The British parliament is expected to vote on the deal, with the opposition Labour Party saying it will vote in favour, while the leader of Northern Ireland’s Democratic Unionist Party (DUP) said his party was working through the details, which should make trade smoother for businesses by easing rules.

British assets showed some strength after the announcement as the deal brightens the outlook for the post-Brexit U.K. economy and marks improved relations between London, the Eurozone’s bloc, and the United States, by removing some of the uncertainty that has hurt British assets since the 2016 vote to leave the bloc.