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Bitcoin Evaporated 30 Billion Market Cap Amid Coronavirus Pandemic and Bearish Economic Outlook

There is a sea of red for stocks and cryptocurrencies this week. Bitcoin has dipped below $6000 for the first time since May 2019. The selloff of cryptocurrencies has extended to altcoins in which the price of Ethereum and Bitcoin SV have dropped 30% and 40% respectively.

Bitcoin Price on March 12, 2020

Source: CoinMarketCap

The selloff of Bitcoin has intensified since 6 pm (HKT), leading to a 23% price drop from $7268. A 30 billion dollar market capitalization of Bitcoin has been wiped out within an hour and Bitcoin once dropped to a yearly low of $5705 (as of press time).

Reasons for the massive selloff

1) Global stock market crash and Coronavirus

The plummeting oil price due to the disagreement between Russia and OPEC nations has been the catalyst for plunging equity indices this week. The New York stock exchange once halted trading for 15 minutes when the S&P 500 tanked over 7%. The US stock market suffered another blow when CME Group announced to cease trading operation at the end of the day on Friday as a precautionary measure to coronavirus.

The widespread of the coronavirus could make things worse. The World Health Organization recently declared the disease COVID-19 a pandemic, in which US President Donald Trump just announced the travel ban to 26 European countries. S&P Composite 1500 Airlines has plunged 13% following Trump’s travel ban announcement.

The coronavirus has seriously dampened the European economy, with Italy tightened its lockdown on economic activities. The shutdown of economic activities indicates economic contraction, in which companies cannot service their debts. When their debts approach maturity, companies may need to dispose of their assets to repay the debts, which in turn leads to a vicious cycle and further economic downturn.

Cboe VIX Index

Source: Cboe

The growing uncertainty of macroeconomic outlook can be reflected by the alarming increase of Cboe VIX index, which has hit a yearly high of 67.65.

2) PlusToken Ponzi Scheme

As reported by Blockchain.News, OXT research recently released the report revealing how PlusToken scammers can bypass the Know-Your-Customer (KYC) compliance standards in regulated exchanges to transfer funds. The controversy of PlusToken is likely to dampen the investor’s confidence on Bitcoin, however, this has a limited impact on the massive selloff of Bitcoin.

Will DeFi suffer even more?

It is noteworthy that the leading tokens in DeFi suffer the most among other leading altcoins. Maker (MKR) resulted in a daily price drop of 44% where the daily price of Synthetix (SNX) plunged 36%. Apart from the massive selloff of Bitcoin, this can be further explained by the recent shutdown of Paradigm Labs.

The recent stock market crash led people questioning the reliability of centralized financial institutions, which Libertarian 2020 Presidential Candidate Adam Kokesh intended to create a decentralized financial system using AmeriCoin. From current observation, however, it seems that DeFi is too vulnerable to serve as an alternative to the centralized financial system.

SNX and AAVE Prices Remain Stable Amid Bitcoin Driven Market Dip

The general cryptocurrency market is back on its forte of trailing whatever retracement Bitcoin (BTC) ushers into the market. After recording a slight bullish correction yesterday, a move that suggested it is yet to amaze the market bulls, Bitcoin saw a significant push back from the $35,000 price mark and it is currently seeing a 2.46% drop at the time of writing according to CoinMarketCap.

As a deviation from the general trend, Decentralized Finance (DeFi) tokens including the Synthetix Network Token (SNX), and Aave (AAVE) have maintained bullish stability irrespective of the current price momentum of Bitcoin.

The Anticipated Roadmap of The Synthetix Network

The Synthetix Network Token (SNX) is seeing a bullish price movement today and this growth can be attributed in part to the anticipated 2021 roadmap released by the project developers. One of the highlights of the roadmaps is to migrate to ‘Optimistic Ethereum,’ a layer 2 scaling solution that will position the network to help address the soaring network transaction fees as well as the scalability issues. The team noted in a blog post:

“The transition to Optimistic Ethereum, a layer two scaling solution, will alleviate many of the issues experienced in 2020. There are two primary advantages to this transition: lower gas costs and higher throughput. Lower gas costs are good for all users and make the system more efficient. Higher throughput will enable us in partnership with Chainlink to reduce oracle latency, allowing for leverage via Synthetic Futures as well as a number of other protocol improvements.”

With the network improvements set to be rolled out at different times of this year, the market bulls appear to be betting big on the coin in advance. SNX is up 8.4% to $15.88 and by 27% in the past week according to data from Coingecko.

The OCC Boost

The performance of Aave, as well as other DeFi tokens, have also maintained a strong bullish positioning following the published OpEd by Brian Brooks, the Comptroller of The Currency wherein he mulled the possibility of providing banking charters for Decentralized Finance projects.

The OCC boss said in the publication:

“Could the OCC even grant a national bank charter to open-source software that manages deposit-taking, lending, or payments, if it doesn’t have officers or directors? Not yet. Under current law, drawn up on the assumptions of the early 20th century, charters can only be issued to human beings. But those antiquated rules should be revisited, just as regulations that still mandate the use of fax machines should be.”

This possibility of getting more support from the OCC remains one major reason why the DeFi markets appear stable despite the ongoing Bitcoin and crypto market price correction. At the time of writing, Aave has amassed 4% in the past hour and 8.5% in the past 24 hours.

Leading Altcoins in the Market Uptrend Today: SNX, TEL, and OKB

While the 1.99% growth in the total market capitalisation of the cryptocurrency industry deserves applause, it is a far cry from the $2.5 trillion it once recorded back in May.

Attributed to the Fear, Uncertainty, and Doubts (FUD) spread by Tesla CEO Elon Musk and China’s ensuing ban on crypto. The entire crypto ecosystem has crumbled under the weight of bearish sell-offs. This has placed many coins at their lowest levels in weeks.

At present, the cryptocurrency ecosystem recorded a weekend in which selling activities were overshadowed by the bulls, as showcased by a robust trading volume. The ensuing influence has stirred a massive price jump on some altcoins, and three of the outperforming coins are profiled below;

OKB (OKB)

OKB remains one of the best performers today, rising 13.03% in the past 24 hours to $10.90. OKB has had its fair share of the ensuring market dip, dropping from its All-Time High (ATH) of $44.17 attained over two months ago. While the coin is 75% below the price level, it has outperformed compared to its All-Time Low (ATL) value of $1.25 attained since 2019.

Telcoin (TEL)

Telcoin is one of the low-priced altcoins, currently changing hands $0.01949 at 25.85% growth in the past 24 hours. While Telcoin is designed to serve as a bridge between cryptos, blockchain, and the telecommunication industry, it has notably gained remarkable traction in the remittance industry. The remarkable growth of Telcoin has pushed it up more than 29,000% from its ATL set about a year ago.

Synthetic (SNX)

Meanwhile, this DeFi token is one of the top performers amongst its peers, rising 20.33% to $13.18. SNX is one of the most versatile altcoins, previously ranking as one of the best gainers per an earlier Blockchain.News report. While SNX as a derivatives market boasts $1.21 billion in Total Value Locked, the token has parred off most of its gains in the past five months.

Synthetix Secures $20M Investment from DWF Labs

Synthetix is a tokenized asset issuance platform that allows users to create Synths by locking tokens into a smart contract and minting derivatives that provide exposure to a range of different assets. The platform’s V2 has surpassed $400 million in perpetual swap daily trade volume, and the collaboration with liquidity provider Curve Finance saw a surge in daily fees, increasing the SNX token value by over 100%.

Synthetix has announced a $20 million investment through a new partnership with Web3 investment and quantitative trading firm DWF Labs. DWF Labs has acquired $15 million worth of Synthetix’ native token SNX paid for with USD Coin (USDC) in March 2023, and has committed to purchasing another $5 million worth of SNX tokens once the integration of Synthetix’ services has been completed.

As part of the deal, DWF Labs will be responsible for increasing SNX token liquidity and market making across centralized and decentralized exchanges. Synthetix’ perpetual futures will also be integrated into DWF Labs’ trading business. Holding SNX tokens allows users to create Synths by locking tokens into a smart contract and minting derivatives that provide exposure to a range of different assets. Users can trade Synths using Synthetix’ pooled collateral model, with trades between Synths generating fees for SNX collateral providers.

The creation of on-chain synthetic assets tracks the value of real-world assets, which includes synthetic fiat currencies or commodities like Gold and financial instruments like equity indices. DWF Labs managing partner Andrei Grachev believes the partnership will provide streamlined trading mechanisms in the Decentralized Finance (DeFi) space, allowing for innovative hedging strategies and unique use cases.

Synthetix’ V2 platform has surpassed $400 million in perpetual swap daily trade volume according to data from Dune Analytics. The partnership with liquidity provider Curve Finance saw a surge in daily fees in June 2022, increasing the SNX token value by over 100% during the depths of the prolonged cryptocurrency bear market.

Overall, the investment from DWF Labs is expected to increase Synthetix’ market reach and liquidity, while also providing streamlined trading mechanisms for users in the DeFi space.