Bitcoin and Ethereum’s Losses Top $24 Billion as Silvergate Dissolves
Top line
Cryptocurrencies fell late Thursday and early Friday following the latest troubling news that Silvergate Capital, the bank that backs much of crypto’s biggest players, is losing major clients and teetering on the brink of bankruptcy.
Keywords
Bitcoin fell 4% to $22,385 from Thursday morning to Friday, hitting a 16-day low, while ethereum also fell 3% overnight.
This slide wipes out $23.6 billion in market value for the world’s two largest digital assets.
There wasn’t a “clear trigger” for the latest selloff, bitbank analyst Yuya Hasegawa wrote in emailed comments, but it appeared to be a belated response to major crypto players like Coinbase, Circle and Paxos announcing Thursday afternoon that they would not longer would use Silvergate’s financial services after the bank said in a regulatory filing Wednesday that it was “less than well capitalized.”
Shares of two of the biggest crypto-exposed listed companies, Coinbase and MicroStrategy, each fell 4% in early trade amid an otherwise strong morning for stocks, as the S&P 500 rose 0.6% to build on Thursday’s gains.
Key background
Founded in 1988, California-based Silvergate rose to prominence over the past decade for its early willingness to work with crypto clients, reaching a valuation of around $6 billion at its peak in November 2021. But just as Silvergate was riding the crypto boom into new heights, it was exposed to the risks of the loosely regulated industry, with the high-profile bankruptcy of the stock exchange FTX spelling its own likely demise. Silvergate endured an $8.1 billion run in the last three months of 2022 as clients panicked over Silvergate’s nine-figure deals with FTX. Shares in Silvergate are down 98% from their peak in November 2021 and fell almost 60% on Thursday after top customers defected.
Decisive quote
The recent crypto dive serves as “a reminder” of the “ripple effects” stemming from FTX’s collapse, which “undermined confidence” in the industry, Oanda analyst Craig Erlam wrote on Friday.
What you should look for
Should bitcoin slip below $22,000, it will likely sink to a six-week low of $21,400, Hasegawa predicted.
Further reading
Crypto Crisis: A Timeline of Key Events (The Wall Street Journal)
Was Silvergate on borrowed time as regulators backed banks away from crypto? (CoinDesk)
Binance’s assets shuffle eerily similar maneuvers to FTX (Forbes)
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