Published: March 10, 2023 at 1:34 p.m. ET
Cryptocurrency values fell drastically on Friday, dropping under $20,000 for the first time since January, as investors become more concerned over the contagion spreading from Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corp., days after the crypto-friendly Silvergate Bank announced it would be winding down operations.
The leading cryptocurrency BTCUSD sank 7.5% on Friday to as low as $17,580 Friday, according to CoinDesk data. EtherETHUSD declined 8% to around $1,401.
Main…
Cryptocurrency values fell drastically on Friday, dropping under $20,000 for the first time since January, as investors become more concerned over the contagion spreading from Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corp., days after the crypto-friendly Silvergate Bank announced it would be winding down operations.
The leading cryptocurrency
BTCUSD
sank 7.5% on Friday to as low as $17,580 Friday, according to CoinDesk data. Ether
ETHUSD
declined 8% to around $1,401.
Main U.S. stock indexes also dropped Friday. The Dow Jones Industrial Average
DJIA
slipped 0.4%, the S&P 500
SPX
fell 0.6% and the Nasdaq Composite
COMP
decreased 0.8%, according to FactSet data.
Silicon Valley Bank, the 16th largest bank in the U.S. at the end of last year, is a major lender for venture-backed companies. Its closure on Friday weighed heavily on the entire industry – the KBW Bank Index on Thursday plummeted more than 7% for its largest daily loss since 2020.
“At this time, there is no real incentive to buy bitcoin as the market is being pulled down by multiple negative developments, not just those specifically related to the crypto industry, but also to the wider financial market,” Yuya Hasegawa, crypto market analyst at Bitbank, wrote in a Friday note.
Also, crypto traders are getting increasingly concerned about regulatory uncertainty in the U.S. Some fear that Silvergate’s liquidation will prompt regulators to take steps to tighten control over banks’ relationship with crypto companies, some industry participants said.
Read: Bitcoin tumbles, as Silvergate Bank’s collapse highlights the biggest threat to U.S. crypto industry
In addition, the New York State Attorney General Letitia James on Thursday filed a lawsuit against crypto exchange KuCoin for failing to register as a securities and commodities broker-dealer. James also claimed that ether is a security in the lawsuit, the first time a regulator doing so in court.
Leveraged derivatives positions are also driving the decline of bitcoin, according to Vetle Lunde, senior analyst at K33 Research. Crypto traders on Thursday observed the largest liquidation volume of long positions in bitcoin since FTX’s collapse, noted Lunde.
The crypto market is also “very illiquid” at the moment, said Lunde. Lenders such as Alameda and Genesis collapsed, and many other market makers have since become more careful. “With Silvergate being shut down, fiat rails are less reliable and market makers are even more conservative. The SVB situation today has likely made the situation worse,” Lunde said.
From the technical perspective, if bitcoin closes Friday below its support level of $20,300, it could increase downside risk for the crypto to fall towards a low of $15,600 it reached in November 2022, according to Katie Stockton, founder and managing partner at Fairlead Strategies.