Bitcoin price drops as Silvergate fears weeding out bullish crypto traders

[ad_1]

Text size

Bitcoin prices fell to their lowest levels since early February. The time of dreams

Bitcoin and other cryptocurrencies fell on Friday as fears over Silvergate Capital took hold, with the crypto-focused banker’s distress likely to negatively impact market functioning and the regulatory picture.

Bitcoin price fell 4% in the past 24 hours to sit below $22,350, dropping below $23,000, a level the biggest digital asset has held above for weeks. Sitting above $22,000, Bitcoin was at its lowest level since early February.

“If Bitcoin fails to defend $22,000, the next stop will likely be around $21,400, where its February low and November high converge,” said Bitbank analyst Yuya Hasegawa.

It seems that worries about the Silvergate issues (ticker: SI) are finally gripping traders. Silvergate, an influential digital asset company banker and key middleman in the institutional crypto market, revealed in filings late Wednesday that securities sales amid a bank run could leave it “less than well capitalized.” “. A federally insured bank, the group said it was assessing its ability to continue operating and was “reassessing its operations and strategies”, also noting a regulatory review.

Initially, the impact on crypto prices was muted: bitcoin slowly slid from above $23,500 to below $23,300 between Wednesday night and Thursday, before prices fell to near $22,000. early Friday. Prices fell sharply as Bitcoin fell below $23,300, driven by losses in the crypto derivatives market, where Bitcoin futures represent the most liquid market among digital assets.

Bitcoin futures positions are often taken with margin or money borrowed from a broker, and can be wiped out in the blink of an eye if the value of the collateral – often the Bitcoin itself – falls below. a required level. According to data from CoinGlass, nearly 80,000 traders have had positions in crypto futures — not just Bitcoin — liquidated in the past 24 hours, with $240 million cleared.

“The drop pushed the price below its 50-day moving average, which doesn’t bode well for the near-term outlook,” said FxPro analyst Alex Kuptsikevich.

Indeed, these endogenous crypto issues are likely to dominate market sentiment for the time being, overshadowing the correlation to the stock market that often sees Bitcoin trading in sync with the Dow Jones Industrial Average and S&P 500. But traders would do well to keep an eye on the stock markets, where investors remain concerned about inflation and interest rates, forces that will likely remain key to sentiment around crypto longer term.

One of the main concerns about Silvergate is that the bank’s problems could impact the liquidity of the crypto markets. The company facilitates transfers between exchanges and market makers – which do much of the trading in Bitcoin – and if that stops, it could exacerbate liquidity issues that have existed for months, making the crypto more volatile.

While this trend is already in play, with many exchanges and trading firms already announcing they are shutting down trading using Silvergate’s platform, it may not be devastating, according to one market participant.

“Fortunately, Silvergate is not FTX. Silvergate is more of a fiat on-ramp for US dollars, rather than a key source of liquidity and volume for the entire crypto ecosystem,” said Michael Safai, managing partner at crypto trading firm Dexterity. Capital. “In the worst case, confidence is a little shaken, which may cause some companies to temporarily withdraw capital from the market.”

Regulatory concerns are also significant, especially as legal storm clouds have gathered around the industry since FTX collapsed in November. At the end of February, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller have warned banks about the risks of accepting deposits from crypto companies. Silvergate said it was “analyzing certain ongoing regulatory and other inquiries and inquiries.”

“In the short term, the issues Silvergate is facing may well upend the crypto industry,” said Dave Weisberger, CEO of CoinRoutes, an algorithmic trading platform. “Longer term, the legal and regulatory issues facing the crypto industry will persist.”

Beyond Bitcoin, Ether – the second largest crypto – fell 4% to $1,565. Smaller cryptos or altcoins were also firmly in the red, with Cardano and Polygon both down 4%. Memecoins saw even bigger losses, with Dogecoin losing 6% and Shiba Inu losing 5%.

Write to Jack Denton at [email protected]

[ad_2]