Bitcoin Sinks to Two-Week Low as Silvergate Fallout Hurts Crypto
(Bloomberg) — Bitcoin fell to its lowest level in about two weeks, part of a broader retreat in crypto markets as investors digested the unraveling of a key industry payments network.
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The largest token fell as much as 6% before paring some of its slide to trade 4.4% lower at $22,380 as of 8:30 a.m. Friday in London. Smaller coins such as Ether, Avalanche and the meme token Dogecoin also saw declines.
The digital asset industry is absorbing the fallout from the troubles at crypto-friendly U.S. bank Silvergate Capital Corp., which has said it is assessing whether it can remain viable. The bank offers a widely used payment network that facilitates the real-time transfer of funds between crypto firms. However, many digital asset exchanges, stablecoin issuers and trading desks no longer accept or initiate payments through Silvergate.
“Silvergate is one of the most important US dollar banking providers for the crypto industry,” said John Toro, head of trading at digital-asset exchange Independent Reserve. “Any liquidity concerns will have a direct impact on market conditions and may affect the access and availability of some client funds.”
Silvergate’s problems are the latest example of the contagion caused by the collapse of the FTX crypto exchange in November. The bank had a run on deposits last year in the wake of the bankruptcy of FTX, which was a key customer.
The digital asset sector is also struggling with broader regulatory tightening in the US, as well as expectations that interest rates will stay higher for longer to combat inflation, reducing risk appetite.
Bitcoin’s fall brought some important technical levels into focus. The token has fallen below its 50-day moving average, which for some chart analysts raises the risk of further decline.
Crypto-investors often turn their eyes to Tether, the largest stablecoin, during periods of market stress. The token is intended to have a constant value of $1 and is widely used to facilitate trading of digital assets, but has long faced questions about the composition of the reserves underlying the peg.
Stablecoin has no exposure to Silvergate, Paolo Ardoino, Chief Technology Officer of Tether, said on Twitter.
Hayden Hughes, co-founder of social trading platform Alpha Impact, said he spotted “heavy buying” of Tether during a five-minute period in the Friday morning trading session in Asia. “We saw a strong defense,” Hughes said, adding that it was “probably by a market maker.”
Bitcoin’s 2023 rally has cooled to 35%, still comfortably above the 4% return of global stocks. Crypto markets last year underwent a $1.5 trillion rout amid tight monetary policy and a series of explosions that exposed high counterparty risk.
–With assistance from Akshay Chinchalkar, Sidhartha Shukla and Suvashree Ghosh.
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