Over $70B Wiped From Cryptocurrency Market In 24 Hours As Bitcoin Drops 8% To Nearly Two-Month Low After Key Crypto Lender Silvergate Became OTHER Bank To Fail this week.
- Bitcoin dipped below $20,000 on Friday, to near a two-month low
- Follows the failure of key crypto lender Silvergate Bank earlier this week
- Silicon Valley Bank, used by some crypto startups, also collapsed on Friday
Bitcoin briefly fell as much as 8% on Friday, dipping back below $20,000 to nearly a two-month low, following the turmoil from the Silvergate Bank collapse earlier this week.
Volatility wiped out more than $70 billion from the cryptocurrency market’s collective valuation in less than 24 hours, according to CNBC.
Silvergate, once a key banking partner for cryptocurrency businesses, announced voluntary liquidation plans on Wednesday as the aftermath of the FTX implosion last year reverberates through the industry.
The California-based company was hit by investors rushing to withdraw about $8 billion in deposits after FTX’s sudden bankruptcy last year.
In a surprising turn of events, the collapse of Silvergate was dwarfed by the failure of Silicon Valley Bank, which was seized by federal regulators on Friday after a similar run on deposits.
Bitcoin has plummeted this week after the bankruptcy of crypto lender Silvergate
Alan Lane, CEO of Silvergate Bank, is seen above. Silvergate, which was a key banking partner for crypto firms, on Wednesday announced plans to voluntarily liquidate
Silicon Valley Bank was much larger than Silvergate, with $207 billion in assets and $175.4 billion in total deposits, compared to the crypto bank’s $3.8 billion in deposits at the end of last year.
SVB’s failure also had some implications for the cryptocurrency market, as its tech startup customer base included some who worked in the cryptocurrency sector.
The dire outcome for California-based Silvergate, one of the crypto industry’s favorite banks, shows the extent of the fallout from FTX’s crash.
In a statement, Silvergate said the decision to liquidate its bank was “the best way forward” in light of “recent industry and regulatory developments.”
Its drawdown and liquidation plan includes the full refund of deposits, the bank added.
Investors and analysts said the market impact of the Silvergate closure, seen as an important bridge between the cryptocurrency sector and the traditional financial world, was limited, as widely expected.
Multiple partners of the bank, including major cryptocurrency exchange Coinbase Global Inc, severed ties with Silvergate last week.
Others, including Binance, said they had no asset losses on Silvergate.
The headquarters of Silvergate Bank in La Jolla, California. Silvergate Capital Corp. plans to shut down operations and liquidate its bank after the collapse of the crypto industry
“Bitcoin investors have had some time to digest this news, they are also much more focused on macroeconomic developments,” said James Butterfill, head of research at digital asset manager CoinShares.
“With growing doubt in the bond market about the risk of damage further interest rate hikes will do to the US economy, it is supporting bitcoin prices to some extent, despite the bad news about Silvergate”.
Even after this week’s crash, bitcoin has gained more than 20% year to date, recouping some of its nearly 65% losses in 2022 caused by a series of high-profile corporate failures in the world of cryptocurrencies.
Most notable was the collapse of FTX, which filed for bankruptcy in November after a run on deposits exposed severe liquidity problems on the crypto exchange, which had been the world’s second-largest.
FTX co-founder Sam Bankman-Fried has pleaded not guilty to fraud and conspiracy charges after prosecutors said he siphoned off billions in client deposits to prop up his hedge fund, buy luxury Bahamas real estate and spend large political donations.
Three of Bankman-Fried’s top lieutenants pleaded guilty to criminal charges and agreed to cooperate with the investigation. His trial is currently scheduled for October.