Calay News
Bitcoin and other cryptocurrencies fell on Friday as worries over the Silvergate Capital spread intensified, with the banker focusing on the danger of cryptocurrencies having a detrimental impact on market operation and the regulatory landscape.
Over the past 24 hours, the price of Bitcoin has dropped 4% to around $22,350, moving below the $23,000 mark that it had been holding for weeks. Bitcoin was at its lowest point since early February, sitting above $22,000.
“If Bitcoin fails to defend $22,000, the next stop will likely be around $21,400, where its February low and November high are converging,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank.
Reportedly, concerns over issues at Silvergate (ticker: SI) had traders in a state of panic. In late-Wednesday filings, Silvergate, a significant broker in the institutional cryptocurrency market and a powerful banker to corporations that deal in digital assets, admitted that the selling of securities during a bank run may leave it “less than well-capitalized.” A bank that is federally insured stated that it was assessing its capacity to do business going forward and that it was “in the process of re-evaluating its activities and plans,” noting regulatory scrutiny.
Early effects on cryptocurrency prices were minimal: between late Wednesday and early Thursday, Bitcoin gradually declined from about $23,500 to below $23,300 before prices crashed to a little under $22,000 early Friday. Losses in the cryptocurrency derivatives market, where Bitcoin futures constitute the most liquid market among digital assets, caused prices to drop rapidly as Bitcoin plummeted below $23,300.
Positions in Bitcoin futures are frequently taken on margin, or with money borrowed from a broker, and they can be instantly lost if the value of the collateral, often Bitcoin itself, falls below a necessary level. According to data from CoinGlass, about 80,000 traders had their holdings in crypto futures liquidated on the previous day, losing $240 million in total.
“The dip has pushed the price below its 50-day moving average, which does not bode well for the short-term outlook,” said Alex Kuptsikevich, an analyst at FxPro.
In fact, it’s possible that in the short run, these crypto-specific concerns will outweigh the stock market’s correlation, which frequently sees Bitcoin trade in sync with the Dow Jones Industrial Average and S&P 500. But investors’ concerns about inflation and interest rates on the equity markets, where traders would do well to keep a watch, are factors that are likely to continue to be important for sentiment towards cryptocurrencies over the long term.
The possibility that issues at the bank could affect liquidity in the crypto markets is a major worry surrounding Silvergate. If the company stops facilitating transfers between exchanges and market makers, which conduct the majority of Bitcoin trading, it might exacerbate liquidity difficulties that have already existed for months, increasing the volatility of cryptocurrencies.
