Bitcoin surges in a storm

Crypto, broadly speaking, is on the rise today. Digital assets, in terms of their aggregate market capitalization, saw a surge Monday night into Tuesday morning, touching, at one point, $1.87 trillion. That’s an increase of nearly 4%, according to Nomics, per Decrypt, noting crypto closing on its all-time high, reached earlier this month, of $1.9 trillion.

There's PayPal news, giving the sector a boost, and there’s some safe haven sentiment with severe turmoil in traditional, centralized finance following the implosion of an overleveraged hedge fund (long the wrong names via derivatives) and big banks stung by steep losses.

Bitcoin crossed back over $59,000 on Tuesday as of 8:30 a.m. (EST). It appears to be the beneficiary of the whirlwind volatility surrounding last week's expiration of about $6 billion worth of options, with bullish bias winning out and seemingly spilling over into this week.

Only a few minor declines can be spotted among the top 100 coins (Filecoin slightly dipped) although nothing pops out as particularly debilitating, save for an unexpected tumble by the 81st-largest-coin, Bitmax Token.

This comes one week after the trading platform announced it had relaunched as AscendEx in the English-speaking world, and "Dingfeng" to Chinese speakers. BTMX got gouged by about 16% in 24 hours, as of Tuesday at 9 a.m. (EST).

If train wrecks are your thing, there's Credit Suisse Group AG (CS); the Swiss bank's stock sank 14% on Monday after it revealed steep losses tied to the Archegos Capital fiasco.

Archegos Capital was forced to dump nearly $30 billion worth of shares as part of the unwinding of some wrong-way over-the-counter derivatives bets, sending shockwaves through the global banking system.

It'll take a few more days to assess to what actual extent the financial system turmoil is leading to any type of flight to crypto.

One indicator, flows into crypto funds, would seem to suggest a waning appetite for funds that invest in digital assets, at least as of last week.

The weekly CoinShares Digital Asset Fund Flows Report, published yesterday, using data as of March 26, noted that while Bitcoin vehicles like the Grayscale Bitcoin Investment Trust (GBTC) still are experiencing inflows, the pace is slowing. Flows into digital asset investment products remained net positive (+$20.6 million) for the most recently measured seven-day period, CoinShares said, however they were at their lowest since last October.

Novice investors were seen as vulnerable and in need of protection following the wildly volatile GameStop trading episode. But now ultra-sophisticated Archegos shines an even brighter light on risky trades and market structure failures run amok.

In addition to the hammering of CS yesterday, the carnage also touched Nomura Holdings (NMR). Those shares tanked 14% as reality regarding major trading losses set it in.

Among the companies impacted by the Friday firesale: ViacomCBS (VIAC) and Discovery Communications (DISCA).

Some giant Chinese companies, which trade as ADRs in the U.S., were swept up as well.

A hedge fund unwinding owing to too much leverage and some bank counterparties convulsing, we’ve seen this before – except now there’s a new asset class, crypto, to serve as a safe haven.

Questions about the systemic risks associated with the sudden, chaotic Archegos deleveraging were raised via a tweet by Allianz advisor/financial pundit Mohamed A. El-Erian: "It's interesting to see the reactions of old/new hedging assets,” he said, pointing out BTC relative sturdiness.

Sure to come back under scrutiny (again): the systemic dangers of an OTC derivatives market, that while vital and vibrant, remains largely opaque.