A wave of scepticism surrounding cryptocurrency-friendly bank Silvergate Capital forced the price of Bitcoin to drop over 5% from $23,500 to $22,240 in less than an hour. The steep decline occurred despite 2023 starting on a strong note.
The details: According to statistics from Glassnode, exchanges sold bullish Bitcoin futures worth over $62 million during the Asian hours, which was the greatest amount since August.
In the past 24 hours, 82,086 traders were liquidated, amounting to $245.55 million. The largest single liquidation order happened on OKX – BTC-USDT-SWAP value at $4.16 million
Note that a liquidation occurs when a trader’s bullish or bearish bet loses money, and they are unable to maintain the leveraged transaction.
The predominance of long liquidations demonstrates that leverage was biased in favour of the bulls, indicating that most traders were prepared for a price increase.
Data from CoinMarketCap shows that the market valuation of bitcoin dropped by nearly $20 billion to $431.9 billion. The total market value of the crypto market is $1.06 trillion at the time of writing this report. Data from Coinglass also revealed open interest in bitcoin futures has decreased by 8.8% during the past four hours. Ether’s open interest decreased by 5%.
What caused it: Silvergate Capital Inc., one of the foundational financial institutions for the cryptocurrency industry, is being gutted in a manner that will be familiar to anybody who has studied bank takeovers.
A March 1 document filed with the U.S. Securities and Exchange Commission, the bank’s disclosures, which included an admission that its health could be threatened by “investigations from our banking regulators,” this week accelerated the latest and most severe exodus of customers from the La Jolla, California-based institution. Following that statement and Silvergate’s open questioning of “the viability of the company’s digital asset-centred business,” significant customers including Coinbase, Paxos, Circle Internet Finance, and Galaxy Digital moved to terminate relations.
The price of the bank’s stock dropped more than 55% on Thursday, and it has dropped around 95% in the last year.
The recent struggles of digital asset-based firms have undoubtedly been shared by their preferred banks, but banking regulators have also been warning those lenders against investing excessively in crypto, claiming that doing so could jeopardize the stability of the banks. In essence, Silvergate was what they were referring to, as evidenced by the abrupt departure of its top cryptocurrency users.
The company had practically become synonymous with crypt banking, and the homepage of its website still highlights the connections it made with the sector after seeing “the potential of digital currency” in the beginning. Given that it was purportedly connected to inquiries into FTX’s fraudulent behaviour, a portion of that relationship may have become poisonous for Silvergate.
Despite this, there was some positivity in the cryptocurrency market. This section will be used to announce Coinbase’s launch of an Optimis-based Ethereum layer-two scaling solution. Naturally, this led to a significant increase in the price of OP.
According to the official press release, the top US crypto exchange hopes that Base, the new network, will attract millions of new users to the sector. The latter claims to do it for a quarter of the price and offer a complete EVM equivalent.
Other cryptos’ performances: Also, the price of ether dropped by 5% from $1,644 to $1,566, wiping approximately $9 billion from its market cap in the first hour. Bitcoin and the cryptocurrency market are suffering severe losses as investors leave crypto bank Silvergate, whose stock fell 58% on Thursday during U.S. trade.
Most of the top ten cryptocurrencies by market cap experienced decreases that were worse than those of Bitcoin.