Decentral Block Post

Bitcoin (BTC) drifted lower on March 25 as eerily calm conditions saw liquidations evaporate.

Bitcoin in "slow chop" until Monday

Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it focused on $27,500 at the time of writing.

After losing $28,000 the day prior, weekend trading offered little by way of its usual volatility as traders hoped for a break before resumption of TradFi markets.

“Looking like a slow chop around the CME close price so far,” Daan Crypto Trades wrote in part of Twitter commentary.

“Not expecting too much to happen with BTC during the weekend after last week's volatility.”

On March 23, Bitcoin (BTC) price recovered the $28,000 support after a brief correction below $27,000. The movement closely tracked the traditional financial sector, particularly the tech-heavy Nasdaq Index, which gained 2.1% as Bitcoin surpassed the $28,000 threshold.

On March 22, the Federal Reserve raised its benchmark interest rate by 0.25% but hinted that it is nearing its maximum level for 2023. In the end, however, Fed Chair Jerome Powell stated that it is too soon to determine the extent of the tighter credit conditions, so monetary policy will remain flexible.

Initially, it appears encouraging that the central bank is less inclined to increase the cost of money. However, global economies are exhibiting signs of stress. For instance, consumer confidence in the euro area decreased by 19.2% in March, reversing five consecutive months of gains and defying economists’ predictions of an improvement.

The recession is still putting pressure on companies’ profits and leading to layoffs. For example, on March 23, professional services company Accenture said it would end the contracts of 19,000 workers over the next 18 months. On March 22, the company Indeed, which helps people find jobs, let go of 2,200 workers, or 15% of its staff.

The stronger the correlation to traditional markets, the less likely a decoupling. As a result, according to futures and margin markets, the Bitcoin price increase has not instilled much confidence in professional traders.

MakerDAO, the decentralized autonomous organization (DAO) that governs the DAI stablecoin, has voted overwhelmingly to keep USD Coin (USDC) as the primary collateral for DAI. An alternative proposal to “diversify” collateral into Gemini U.S. Dollar (GUSD) and U.S. Dollar Paxos (USDP) has been rejected in a 20% to 79% vote, according to the proposal’s official page.

In the proposal posted on March 17, the MakerDAO Risk Core Unit suggested that the risk of a cascading bank run in the U.S. has been reduced, thanks to responses from the U.S. federal government. As a result, the risk of using USDC as collateral “has declined significantly since last week and further solvency concerns or depegs are not expected at this time.”

However, it also argued that some risks remain. USDC has “potentially more risky exposure to uninsured bank deposits” and “a weaker legal structure” when compared to its competitors, GUSD and USDP, the proposal stated.

Related: Powell says Fed stumped over the collapse of SVB

The Risk Core Unit offered two options to “normalize” the rules for minting DAI now that the crisis has passed. The first option was to spread minting capacity limits across USDC, GUSD, and USDP. If this option were chosen, the fee for converting USDC to DAI would be reduced from 1% to 0.05% immediately, but would not be reduced all the way to zero until some later date.