Bitcoin plunges 8% as crypto market falls below $1 trillion

It’s more pain for Bitcoin (BTC) investors as the price of the leading cryptocurrency crashed below $20,000 on Friday.

At the time of writing, Bitcoin is down 8.3% on the day, trading at the $19,900 level last seen on January 13, according to Coingecko.

Ethereum (ETH) is following a similar pattern as the price of the world’s second-largest cryptocurrency is down 9.8% in the past 24 hours, changing hands at a nearly two-month low of $1,383.

In a remarkable change in fortunes for the broader crypto market, which started the year with some big gains, pushing Bitcoin close to $25,000, the latest downtrend also saw the broader market cap of all cryptocurrencies fall below $1 trillion for the first time since January 19 .

Bitcoin, Ethereum in free fall

The industry has been hit by some serious headwinds in recent weeks, with the meltdown of crypto-friendly Silvergate Bank, which went into voluntary liquidation on March 8, arguably one of the key drivers behind the latest downturn.

Silvergate has provided a convenient banking avenue for many crypto businesses, but “without the ability to channel fiat currency into the crypto world, crypto looks more like a still pond than a sparkling fountain of innovation,” said Matrixport’s head of research Markus Thielen. in his last note.

“Silvergate has not only been the main link between investors who wanted to channel money to crypto exchanges, crypto hedge funds, crypto venture capital funds and crypto projects, but the bank also offered to settle balances between Silverbank customers at any time of the day, including weekends and holidays,” wrote he.

Research director at Kaiko Clara Medalie echoed Thielen’s remarks, saying that “the Silvergate collapse has certainly had the biggest impact on market sentiment.”

“When the news first broke, markets hadn’t realized the extent of Silvergate’s impact on the entire crypto ecosystem, but over the past few days, traders have been pricing the collapse in,” Medalie said Decrypt. “There are larger fears that Silvergate’s collapse could dampen banks’ willingness to work with crypto firms, essentially taking us back to pre-2017 when the industry struggled to form banking relationships.”

According to the Kaiko analyst, “with fewer fiat ramps, institutional investors will have a harder time deploying capital in crypto markets, which could have a broader impact on liquidity and market efficiency.”

Bearish pressure beyond Silvergate

Adding more pressure to the nascent industry, the US Treasury Department on Tuesday proposed a 30% excise tax on the cost of operating Bitcoin mining facilities, while the New York Attorney General’s office filed a lawsuit against cryptocurrency exchange KuCoin for allegedly violating securities and commodities laws. in the condition.

In the complaint, Attorney General Letitia James also alleged that Ethereum “is a speculative asset that relies on the efforts of third-party developers to provide profit to the holders of ETH,” and as such is a security.

“It is not surprising to see the recent plunge in the crypto market. President Biden’s recent proposal to impose a 30% tax to reduce mining activity in the United States has undoubtedly played a significant role in this decline,” said Jeff Mei, COO of crypto exchange BTSE. Decrypt.

According to Mei, “this tax proposal has caused concern among investors, who fear that it could lead to reduced profitability and lower adoption of crypto mining in the United States.”

Mei also cited the recent lawsuit against KuCoin by the NY Attorney General’s Office and hawkish comments from Fed Chair Jerome Powell regarding a possible rise in inflation among the reasons that have also contributed to the market’s decline.

According to the COO, all these factors combined to create “a perfect storm”, which ultimately led to the crypto market’s biggest crash this year.

Nevertheless, BTSE remains positive on the long-term outlook for the crypto market.

“We are seeing progress being made in regulatory clarity and infrastructure creation around the world, particularly in Asia, setting the industry on a good path for future innovation and adoption,” Mei said Decrypt.