Topline
Cryptocurrencies fell late Thursday and early Friday after the latest troubling news about Silvergate Capital, the bank that backs most of the biggest crypto players, losing major clients and teetering on the brink of bankruptcy.
It was more pain than gain (or chain) for bitcoin investors on Friday.
Highlights
Bitcoin fell 4% to $22,385 from Thursday morning to Friday, hitting a 16-day low, while Ethereum also slid 3% overnight.
This slide wipes out $23.6 billion in market capitalization for the world’s two largest digital assets.
There was no “clear trigger” for the latest selloff, bitbank analyst Yuya Hasegawa wrote in emailed comments, but it seemed like a delayed response to major crypto players like Coinbase, Circle and Paxos. announcing Thursday afternoon they would no longer use Silvergate financial services after the bank said in a regulatory filing Wednesday, it was “less than well capitalized.”
Shares of two of the largest crypto-exposed publicly traded companies, Coinbase and MicroStrategy, each fell 4% in early trading amid an otherwise strong morning for stocks, as the S&P 500 rose by 0.6% to build on Thursday’s gains.
Key context
Founded in 1988, California-based Silvergate has grown in prominence over the past decade for its early will working with crypto clients, hitting a valuation of around $6 billion at its November 2021 peak. But just as Silvergate propelled the crypto boom to new heights, it exposed itself to industry risks loosely regulated, with the high-profile bankruptcy of the FTX exchange spelling its own likely downfall. silver gate endured an $8.1 billion run in the final three months of 2022 as clients panicked over Silvergate’s nine-figure deals with FTX. Silvergate shares are down 98% from their November 2021 peak and fell nearly 60% on Thursday after its top clients jumped ship.
crucial quote
The recent crypto plunge serves as a “reminder” of the “ripple effects” resulting from FTX’s collapse, which “undermined confidence” in the industry, Oanda analyst Craig Erlam wrote on Friday.
To monitor
If bitcoin dipped below $22,000, it would likely fall 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 asset shuffling is eerily similar to FTX shuffling (Forbes)