$920 billion is the number to watch now that the total crypto market cap of $1 trillion is gone

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Big round numbers always pique investor interest, and the $1 trillion total market capitalization is no exception. This is a level that held for 48 days before collapsing on March 9. After an 8.6% negative price movement over 16 hours, the indicator fell to $914 billion, its lowest level since Jan. 13.

Total crypto market capitalization in USD, 1 day. Source: Trading View

Concerns about the stability of the US banking sector are growing. The fall and closure of Silvergate Bank, as well as the closure of Silicon Valley Bank (SVB) by the California Department of Financial Protection and Innovation are among the reasons the crypto market fell below support market capitalization of $1 trillion. Silvergate was a critical fiat gateway network for cryptocurrency exchanges and intermediaries.

The California Department of Financial Protection and Innovation did not explain SVB’s closure. Nonetheless, he said the financial institution would be the first FDIC-insured institution to fail in 2023.

Silicon Valley Bank had over $200 billion in assets and provided financial services to several crypto-focused venture capital firms, including Andreessen Horowitz and Sequoia Capital.

Remember the US Federal Reserve’s ongoing efforts to rein in inflation, which include raising interest rates above 2% in August 2022 and shrinking its balance sheet through asset sales. On top of that, US labor market data released on March 10 showed 311,000 jobs created in February 2023, supporting the idea that the Fed’s anti-stimulus measures require additional firepower.

The unexpected result of central banks’ cautious stance is a greater likelihood of a longer and more severe economic downturn. Investors demanded a higher yield for two-year Treasury bills relative to longer-dated bonds, sending the inverted bond curve to its highest level in 40 years.

How significant is the market capitalization of $920 billion?

A notable bounce occurred as the crypto’s total capitalization reached $920 billion, indicating strong buyers around this level, which may seem insignificant at first glance but is essential for Bitcoin (BTC), the main cryptocurrency. Bitcoin represents about half of the total crypto market capitalization when stablecoins are excluded.

As a result, Bitcoin’s $380 billion market capitalization serves as the basis for the $920 billion total. There are three reasons why such a level is critical from a valuation perspective.

Bitcoin is still one of the world’s top 20 tradable assets, valued at over $380 billion, ahead of retail giant Walmart, international payment processor Mastercard and highly profitable consumer discretionary Procter & Gamble. It becomes more difficult to attribute failure after such a remarkable achievement.

Despite Bitcoin falling 50% in 12 months to $19,650, its performance is on par with billion-dollar companies like Credit Suisse, down 63%; First Republic Bank, down 51%; Warner Bros Discovery, down 43%; and Intel Corporation, down 43%.

Finally, maintaining its capitalization of 380 billion dollars, it remains the seventh base currency in the world compared to fiat currencies. For example, the Australian dollar has a money supply of $378 billion, while the Canadian dollar has a money supply of $220 billion. The Indian rupee, with a monetary base of $500 billion, is the next potential target.

For the moment, the put/call options ratio is stable

Traders can gauge market sentiment by measuring whether more activity is going through call options or put options. Generally speaking, call options are used for bullish strategies, while put options are used for bearish strategies.

A put-call ratio of 0.70 indicates that open interest on put options lags the larger number of call options and is bullish. On the other hand, an indicator at 1.40 favors puts, which is a bearish sign.

Related: South Dakota Gov. Vetoes Bill Excluding Crypto From Definition of “Money”

Put-call ratio of BTC options volume. Source: laevitas.ch

Since March 8, demand for protective put options has increased, indicating risk aversion among derivatives traders. Other than a brief overshoot on March 9 when the put-to-call ratio jumped above 1.50, nothing was unusual as the move coincided with Bitcoin price falling below $22,000.

The spread in favor of the put options risk measure had narrowed, indicating that even professional traders were understaffed as the crypto market fell to new lows.

More importantly, the Bitcoin options market is showing no signs of stress, which is encouraging given the immense pressure from the banking sector and the outlook for a declining economy.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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