Bitcoin And Ethereum’s Losses Top $24 Billion As Silvergate Unravels
top line
Cryptocurrencies slumped late Thursday and early Friday after the latest troubling news about Silvergate Capital, the bank that backs many of the biggest crypto players, losing key customers and teetering on the brink of bankruptcy.
Important facts
Bitcoin fell 4% to $22,385 from Thursday morning to Friday, hitting a 16-day low, while Ethereum is also down 3% overnight.
This price drop wipes out $23.6 billion in market cap for the world’s two largest digital assets.
There was no “clear trigger” for the recent sell-off, Bitbank analyst Yuya Hasegawa wrote in emailed comments, but it appeared to be a belated reaction from major crypto players like Coinbase, Circle, and Paxos, which reported Thursday afternoon announced they would no longer be using Silvergate’s financial services after the bank said it was “less than well capitalised” in a regulatory filing filed on Wednesday.
Shares of two of the largest crypto-exposed public companies, Coinbase and MicroStrategy, fell 4% each in early trade on an otherwise strong stocks morning, as the S&P 500 rose 0.6% to build on Thursday’s gains.
key background
Founded in 1988 and based in California, the company has made a name for itself over the past decade for its early willingness to work with crypto clients, reaching a valuation of approximately $6 billion at its peak in November 2021. But just as Silvergate was taking the crypto boom to new heights, it was exposed to the risks of the loosely regulated industry, with exchange FTX’s high-profile bankruptcy spelling its own probable demise. Silvergate suffered an $8.1 billion run in the final three months of 2022 as customers panicked over Silvergate’s nine-figure deals in FTX. Silvergate’s shares are down 98% from their November 2021 high and fell nearly 60% on Thursday after its top clients walked off the ship.
Crucial quote
The recent crypto swoop serves as a “reminder” of the “ripple effects” arising from FTX’s collapse that have “eroded confidence” in the industry, Oanda analyst Craig Erlam wrote on Friday.
What to look out for
If Bitcoin falls below $22,000, it is likely to drop to a six-week low of $21,400, Hasegawa predicted.
Continue reading
Crypto Crisis: A Timeline of Important Events (Wall Street Journal)
Was Silvergate on Borrowed Time When Regulators Backed Crypto Banks? (CoinDesk)
Binance’s asset shuffling is eerily similar to FTX’s maneuvers (forbes)
follow me Twitter. Send me a safe tip.