Bitcoin Falls Below $20,000; $70 billion wiped out the crypto market

Bitcoin fell below $20,000 on Friday, hitting a nearly two-month low, following a U.S. stock market selloff and the collapse of a crypto-focused lender.

The cryptocurrency market saw more than $70 billion wiped off its value in the 24 hours to 5:12 a.m. ET.

Bitcoin traded down nearly 8% to $19,900.28 at 5:11 a.m., according to CoinDesk data. ET. Ether was down more than 8% to $1,400.63.

The crypto sell-off has been prompted by a number of factors. The movement of cryptocurrency prices is quite closely correlated to US stock markets, especially the tech-heavy ones Nasdaq. On Thursday, major US indices closed lower.

On Tuesday, US Federal Reserve Chairman Jerome Powell indicated that interest rates could go higher – and stay higher – than expected. The increase in interest rates over the past year has weighed on risk assets such as shares, and in particular cryptocurrencies.

“There is little reason to buy bitcoin now as the market is saturated with negative developments, not only specifically for the crypto industry, but also for the broader financial market as well,” said Yuya Hasegawa, analyst at Japanese crypto firm Bitbank. CNBC via email.

Another major factor weighing on crypto prices is the collapse of Silvergate Capital, a major lender to the crypto industry. Silvergate said Wednesday it is winding down operations and liquidating the bank.

Silvergate’s downfall is another example of how the collapse of major cryptocurrency exchange FTX continues to impact the industry. FTX was a major customer of Silvergate.

Separately, Silicon Valley Bank said late Wednesday that it sold off $21 billion of its holdings at a loss of $1.8 billion. SVB is a major bank within technology start-ups. By offering traditional banking services while financing technology projects, it is considered a backbone of the US venture capital industry

The asset sale comes as SVB struggles with a weaker technology funding environment as VCs remain cautious amid a weaker macroeconomic situation and rising interest rates.

Both Silvergate and SVB put their money into US Treasuries, which have lost value as the Fed has raised interest rates. These banks have been forced to sell these bonds at a loss to strengthen their capital position.

“Overall, sentiment appears to have turned quite bearish given a combination of global macro and interest rate hikes, but also the exposure many banks likely have to long-dated securities,” Vijay Ayyar, vice president of corporate development at crypto exchange Luno, told CNBC via e -mail.