Bitcoin falls to seven-week low as bank failure, regulatory pressure weigh on crypto
Bitcoin (BTC-USD) fell more than 7.5% late Thursday to $20,300, a seven-week low for the largest cryptocurrency.
“This remains a tough environment for crypto. Bitcoin could see further selling pressure test the $20,000 level,” said Edward Moya, senior market analyst at Oanda.
Ether (ETH-USD) is down by the same amount during this period, currently changing hands at $1439 per coin.
Crypto’s total market capitalization fell more than 6% through Thursday from $1 trillion to $942 billion as measured by Coinmarketcap.
Crypto investors and companies are grappling with what the liquidation of Silvergate Capital (SI), a key US banking partner, could mean for the crypto asset class’s access to dollars.
“It won’t be a smooth transition for the industry at all,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, told Yahoo Finance.
Silvergate offered a payment network that allowed customers to exchange US dollars between accounts 24/7 to match the liquidity needs of the crypto market. The bank suspended the offer last Friday.
The other bank most receptive to crypto firms, Signature Bank ( SBNY ), is also actively reducing its exposure to digital asset business. “If small banks like Customers and Pathward (formerly MetaBank) don’t step in to fill the gap, other options include the euro and non-dollar-backed stablecoins, Conor Ryder,” an analyst for Kaiko said Thursday.
“It’s a blow to the ecosystem, but it’s unlikely to be permanent,” Acheson added.
Crypto markets were also under pressure on Thursday as broader financial strains in the banking sector emerged amid new challenges such as Silicon Valley Bank, news that sent shares of parent SVB Financial down 60% on Thursday as the benchmark S&P 500 fell around 1.8%.
Elsewhere, the Biden administration is proposing to raise $24 billion for the US government by closing a tax loophole. The loophole allows investors to harvest their crypto losses to offset capital gains and income for individuals.
“As other countries bring crypto safely into the regulatory perimeter, we should do the same,” Paul Grewal, Coinbase’s general counsel, said before a US House Finance Committee on Thursday afternoon.
Largest among US crypto firms, Coinbase (COIN) has multiple banking partners and is not at immediate risk from Silvergate’s liquidation given the exchange ended business with the firm last week.
Nevertheless, CFRA Research has chosen to maintain its hold rating on shares in Coinbase at neutral.
“While COIN has more measured exposure directly to SI, indirect influences around the health of like-kind clients and/or general investor enthusiasm (ie, trading activity) can also create an overhang on COIN’s fundamentals,” CFRA analyst David Holt said in a Thursday note.
Shares of Coinbase fell 7.8% on Thursday to $58.
The New York Attorney General’s office is also suing KuCoin, the fourth-largest crypto exchange by trading volume, for failing to register as a securities and commodities broker.
“My office is taking action against cryptocurrency companies that brazenly ignore our laws and put investors at risk,” Attorney General Letita James said in the release.
David Hollerith is a reporter for Yahoo Finance. Follow him on Twitter @DSHollers
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