Bitcoin falls below $20,000, set for worst week since FTX crash
(Bloomberg) — Bitcoin is having its worst week since November as a stock selloff, banking sector turmoil and an escalating U.S. regulatory crackdown on crypto combined to hurt investor sentiment.
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The largest token fell as much as 3.2% on Friday, breaking below $20,000 for the first time since January, after falling more than 8% on Thursday, Bloomberg data showed. Smaller coins such as Ether, Solana and Cardano also increased their losses.
Anxiety rose across all risk asset classes after news that Silicon Valley Bank collapsed into the Federal Deposit Insurance Corp. on Friday, prompting a selloff in U.S. stocks and many banks as analysts weighed contagion risks. SVB’s failure follows the liquidation of crypto-friendly bank Silvergate Capital Corp. which weighed on market sentiment earlier this week.
“With Silvergate headlines quickly overshadowed by Silicon Valley Bank, macro is firmly in the driver’s seat now,” said Spencer Hallarn, derivatives trader at crypto investment firm GSR. “The broad stock market and crypto weakness can be attributed to the problems at SVB and fears that exist elsewhere.”
Silicon Valley Bank became the first bank to fail in 2023, as the California Department of Financial Protection and Innovation said on Friday it had taken possession. That raised concerns about what other institutions might be affected at a time when the Federal Reserve is implementing its most aggressive tightening campaign in a generation.
For crypto to sell off in this environment makes sense, analysts say, because of its risk-asset characteristics.
“It’s collateral damage,” said Alec Young, investment strategist at MAPsignals. “And that’s expected by crypto investors — that’s what you’re signing up for with crypto.”
Other crypto-centric stocks also took a hit, with MicroStrategy Inc., Riot Platforms Inc. and Coinbase Global Inc. extending their weekly losses on Friday.
“Cryptocurrency sales appear to be largely stock market-led,” said John Toro, head of trading at digital-asset exchange Independent Reserve. He added that Silvergate’s liquidation and President Joe Biden’s proposal for a series of tax increases on investors and top-earning Americans contributed to the decline.
Meanwhile, in New York, the state regulator this week sued KuCoin, a popular crypto exchange, claiming in court that the second largest token Ether is a security. The US Securities & Exchange Commission also claims that many cryptocurrencies are securities, a designation that would potentially make them more difficult to trade.
Bitcoin has lost roughly 13% so far this week, the most since a 23% weekly drop in November amid the collapse of Sam Bankman-Fried’s FTX platform.
Among smaller tokens, some of the spotlight fell on HT, the original token of the Huobi exchange. HT on Thursday quickly halved in price at one point before paring some of the losses. It has fallen around 18% in the last 24 hours.
China-born crypto mogul Justin Sun, an adviser to Huobi, indicated that a $100 million fund had been set up to improve the platform’s liquidity.
Sentiment in digital asset markets as a whole has taken a hit from the demise of Silvergate’s payments platform for crypto firms, as well as Chairman Jerome Powell’s stance that the Federal Reserve is likely to charge higher than previously expected rates.
“Crypto-native themes, running parallel to choppy stock markets, are the perfect recipe for volatility,” said Edmond Goh, head of trading at B2C2.
Bitcoin has now dipped below its 200-day moving average, which for some analysts could portend more falls.
The token is likely to trade at the lower end of a range from around $15,500 to $25,000, said Tony Sycamore, market analyst at IG Australia Pty. “Risk sentiment has really deteriorated this week,” he said. “Powell was more hawkish than markets expected.”
–With assistance from Akshay Chinchalkar, Eva Szalay and Sunil Jagtiani.
(Adds new SVB context, updates prices throughout.)
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