The cryptocurrency market experienced a significant decline on Friday morning, as concerns surrounding Silvergate Bank sent shockwaves through the industry.
Bitcoin fell 4.5% in the past 24 hours, dropping to a two-week low of $22,259 before climbing back up to around $22,350 by press time. Ethereum followed suit, dropping 4.6% over the day to trade at $1,565 at the time of writing.
Other major altcoins, including Cardano, Polygon, Solana, Polkadot, and Avalanche also saw losses within the 4% to 5% range.
Analysts are keeping a close eye on how this move will play out, with some calling for calm while others predict a deeper retracement for Bitcoin.
Market capitalization of all cryptocurrencies declines overnight
The market capitalization of all cryptocurrencies lost about $48 billion overnight, standing at $1.077 trillion, according to CoinGecko.
The sharp decline in prices can likely be attributed to recent developments surrounding Silvergate Bank, which has provided a payment network for many crypto businesses.
The bank, which was once a banking partner for many of the crypto industry’s best-known names, is facing reduced or abandoned partnerships due to concerns that it may be “less than well capitalized.”
Silvergate Bank had previously reported a $1 billion net loss as well as a decline in customer deposits of roughly $14 billion in the last quarter of 2022.
In order to address the high volume of withdrawals it experienced, the bank that is known for its support of cryptocurrency obtained a loan of $4.3 billion from the Federal Home Loan Bank and sold approximately $5.2 billion in debt securities.
However, Silvergate admitted on Wednesday that it was assessing the impact of its recent losses and determining “its ability to continue as a going concern.”
This development led U.S. exchange Coinbase to announce that it had stopped using Silvergate, with Crypto.com following suit.
Stablecoin giant Circle also stated that it was “sensitive to the concerns around Silvergate” and was “in the process of unwinding certain services with them.”
Timeline of #Crypto Crash Today:
1. Coinbase suspends Silvergate payments
2. SEC says crypto exchanges not "safe"
3. Crypto․com suspends Silvergate payments
4. FTX confirms $8.9 billion in missing funds
5. Crypto loses $200+ million in hours
This can't be a coincidence.
— The Kobeissi Letter (@KobeissiLetter) March 3, 2023
The recent episode marks the latest in a long-running debacle that began with the bankruptcy of exchange FTX, to which many crypto firms had significant exposure.
Crypto companies distance themselves from Silvergate Bank
A slew of crypto companies, including industry heavyweights LedgerX, Coinbase, and Tether, have either distanced themselves from Silvergate or terminated their partnerships altogether.
As a result, the bank’s stock nosedived by a staggering 57%, reaching an unprecedented low of $5.72 at the end of trading on Thursday.
The news of Silvergate’s potential insolvency has sent shockwaves through the crypto industry, with investors and traders taking a cautious approach.
Despite this, many experts believe that the collapse of fiat banking for exchanges will not have a significant impact on Bitcoin, with some even suggesting that P2P trading will become more prevalent.
Many commentators noted that “Silvergate going down and exchanges losing their banking doesn’t impact Bitcoin.”
Some argue that “the collapse of fiat banking for exchanges will just mean buying/trading goes P2P,” with a robust P2P trading ecosystem still in place, even with exchanges gone.
Certain traders had been anticipating a drop in the price of Bitcoin for some time.
BTC’s price has been struggling to overcome resistance above $25,000 for several weeks, leading to a relatively stagnant month.
The lack of organic price movements, combined with high liquidity on exchanges, has made a price drop unsurprising to some traders.
According to Skew, a trading resource, a single transaction on Binance caused the recent drop in Bitcoin’s price.
This triggered a significant wave of liquidations, with BTC long liquidations totaling $72.9 million and cross-crypto liquidations standing at $205 million at the time of writing. These figures indicate that many traders were unprepared for a price pullback.
It remains to be seen how the situation with Silvergate will ultimately play out, but the recent news has highlighted the importance of financial stability and transparency within the crypto industry.
