Bitcoin sees sharp drop amid uncertainty with crypto bank Silvergate
Bitcoin dfell sharply on Friday after speculators began to doubt the health of a major crypto firm, with the flagship cryptocurrency falling roughly 5%.
The sharp sell-off comes as shares in crypto bank Silvergate Capital are hammered. Silvergate announced this week that it would not file its annual 10-K report on time, which is required by the Securities and Exchange Commission and describes the company’s fiscal health. Silvergate said it would need a couple more weeks and is “currently analyzing certain regulatory and other inquiries and investigations.”
The delay raises concerns that one of the biggest banks in the cryptocurrency space is struggling to stay in business. As of Friday morning, Silvergate shares were down a staggering 64%. Even more shockingly, the crypto bank has lost more than 95% of its value since the beginning of the new year.
“The company is currently reassessing its businesses and strategies in light of the business and regulatory challenges it currently faces,” Silvergate said of the situation.
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The bank said there were a number of reasons for the struggles, including major cryptocurrency bankruptcies last year, the biggest of which was FTX’s dramatic implosion, as well as general market volatility in the latter part of 2022.
That uncertainty at Silvergate is now filtering down to anxiety in the cryptocurrency markets.
Bitcoin has fallen to $22,300 after hitting above $25,000 last month in what has generally been a good couple of months for bitcoin, which has appeared to bounce back from heavy losses in the wake of the FTX collapse. Ethereum, the second-largest cryptocurrency, fell about 3.7% on Friday to hover around $1,560.
Markus Thielen, head of research at digital asset platform Matrixport, said the falls are closely linked to Silvergate’s floundering business operations.
“The fallout is due to the continued fallout from Silvergate Bank as there is now more uncertainty about fiat on and off ramps,” he said Coin Telegraph. “Additionally, there are now greater concerns in the industry that US regulators are trying to cut further banking relationships between crypto firms and FDIC-insured banks.”
Apart from this week, bitcoin and other major cryptocurrencies have had a year marked by recovery.
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On New Year’s Day, bitcoin was trading around $16,500 and was generally below $17,000 most of the time following FTX’s dramatic implosion in mid-November. But as of Friday, the flagship digital asset was trading up more than 35% from that time. Ethereum has grown by around 30% in the same period.
“The important thing about this rise is that this is back to the level it was before the FTX implosion for both bitcoin and ethereum,” John Berlau, senior fellow and director of fiscal policy at the Competitive Enterprise Institute, recently told the paper. Washington Examiner.
