Bitcoin, Ether decline in broad selling amid Fed red flags on rates, Silvergate Bank failure

Bitcoin fell to near the $20,000 support line in Friday morning trade in Asia, while Ether and all other top 10 non-stablecoin cryptocurrencies fell to end a week of mostly red ink. Crypto prices followed stocks lower as US Federal Reserve Chairman Jerome Powell warned this week that interest rates must go higher than expected to curb inflation. The bankruptcy of crypto bank Silvergate on Wednesday added more downward pressure on crypto prices. Shiba Inu led the losers. Another negative is the increasingly public conflict between US regulators over whether to define crypto-assets as securities or commodities.

See related article: The CFTC chair calls Ethereum a commodity, contrary to SEC Chairman Gensler’s position

Fast facts

• Bitcoin rallied 7.41% in the past 24 hours to $20,127 as of 09:00 a.m. in Hong Kong, according to CoinMarketCap data, hitting a low for the month. The price of the largest cryptocurrency has fallen 14.10% in the past seven days, but is still up over 20% year-to-date.

• Ether fell 7.17% to $1,426, for a weekly loss of 13.25%.

• Shiba Inu lost 8.89% in 24 hours for a seven-day loss of 16.94%. Litecoin replaced the meme token as the 10th largest non-stablecoin cryptocurrency, but didn’t fare much better, falling 8.67% to US$75.63, for a loss of 20.35% in the past week.

• Silvergate Bank said on Wednesday that the US-based crypto-financial services company will liquidate, triggering a price slide that has wiped over $60 billion from the crypto market cap in the past 24 hours.

• The total crypto market capitalization fell 6.15% in the last 24 hours to USD 934.43 billion. Total trading volume in the period rose by 33.47% to USD 59.39 billion.

• Adding to the concerns of crypto investors, New York Attorney General Letitia James filed a lawsuit against crypto exchange Kucoin on Thursday, alleging that Ether and some other crypto assets are securities and should be registered as such. This was the first time Ether was claimed to be a security by a US Attorney General in court. Other US regulators are in public dispute over whether Ether is a commodity or a security, an argument that will affect the status of many crypto tokens.

• Following the Silvergate fiasco, cryptocurrency exchange Blockchain.com said early Friday it was winding down its UK-based asset management arm, adding to a series of cutbacks across the industry since the collapses of Terra-Luna stablecoin and FTX exchange last year.

• US stocks fell on Thursday. The Dow Jones Industrial Average closed 1.66% lower, the S&P 500 fell 1.85%, and the Nasdaq Composite Index fell 2.05%.

• Fed Chairman Powell said in testimony on Capitol Hill this week that higher-than-expected interest rates may be needed to curb inflation, depending on the latest economic readings. One data point to note on Friday is the February employment report, with analysts estimating 225,000 new jobs added and an annual increase in average hourly wages of 4.8%, according to CNBC. If the numbers are as expected, it will support the Fed’s view that inflation remains a problem in the economy.

• US interest rates are between 4.5% and 4.75%, the highest since October 2007. Analysts at CME Group predict a 60.9% chance the Fed will raise rates by 50 basis points this month, down from 78.6% prediction on Thursday. They forecast a 39.1% chance of a 25 basis point increase, a sharp reversal from the majority view last month.

• BlackRock, the world’s largest asset manager, expects interest rates to peak at 6% this year and remain there for longer to bring inflation back to the central bank’s preferred 2% range, CNBC reported, citing BlackRock’s chief investment officer for global fixed income. Rick Rieder.

• The US annual inflation rate is 6.4% for the 12 months ended January 2023, according to Labor Department data published on February 14. The next inflation update is scheduled for March 14 at 8:30 a.m. Eastern Standard Time.

See related article: Kryptobank Silvergate closes, returns all deposits; will be the last victim of cryptouro in 2022