Bitcoin and Ethereum took some nasty dips in early March due to negative news surrounding popular digital currency bank Silvergate Capital.
Silvergate Has Sent Ripples Throughout the Space
The company announced a net loss of more than $1 billion, and other crypto-based companies – like Paxos and Coinbase – were quick to step away from it and cut off all business with the firm. In addition, Silvergate stock fell by more than 60 percent.
The good news – according to Michael Safai, managing partner at crypto trading firm Dexterity Capital – is that these effects will be short lived. He’s not convinced Silvergate is significant enough to bring down the bitcoin market on a whole, and he thinks the repercussions of the bank’s weak outcome will likely wear off in due time. He stated in an interview:
This is news we knew about for the entirety of the U.S. trading day, but it wasn’t until Asia came on that things started to plunge. It’s more a case of jaded traders digesting the news and not wanting to be left holding any potential ticking time bombs, but not understanding how this differs from the collapses of 2022… Silvergate’s direct impact on market liquidity is very marginal at best, and any impact would be psychological rather than material.
Still, these words aren’t calming most investors as the bank was largely entangled with crypto firms such as FTX, the now defunct digital trading platform run by Sam Bankman-Fried. The company has been swallowed up in a story containing both bankruptcy and executive fraud, and traders are feeling a little nervous about where Silvergate could lead the industry. Wael Makarem – senior market strategist at investment broker Exness – explained:
Fears are growing that a crypto-focused bank failure could constitute a new hit to investors’ confidence after the bankruptcies of major crypto players during the last few months. As a result, the market could be exposed to new price corrections while investors could be concerned about a potential impact on other market players. This incident could strongly dent the market’s recent rebound as cryptocurrencies remain in a delicate position. Additionally, the dwindling number of companies operating in crypto could add to the concerns.
Noelle Acheson – author of the “Crypto Is Macro Now” newsletter – believes that what’s happening with the bank won’t trigger any major selling within the space, which could allow assets like BTC to recover faster than what many are anticipating. She said:
There is some dismay around the Silvergate news, but it’s not clear it would trigger strong selling.
A Crash Following Some Nice Price Hikes
The news is still harsh as bitcoin recently experienced a few solid price rises, having hit a new six-month high in mid-February of this year.
The currency was trading at $25K per unit, and many traders believed $30K was around the corner.
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- Source: https://www.livebitcoinnews.com/btc-stumbles-following-silvergate-bank-debacle/
