Bitcoin, ether drop after Silvergate announces liquidation

Bitcoin slid 7 per cent to $20,474.50, while ether lost about the same amount and was last trading at $1,440.45

Crypto prices dropped Thursday after Silvergate, a bank that has been at the hub of the industry’s growth, made a decision to close down.

Bitcoin dipped 7 per cent to $20,474.50, as per Coin Metrics. Ether shed approximately the same amount and was last trading at $1,440.45.

The slight move downwards started late Wednesday, a few hours after Silvergate Capital announced it will shut down operations and liquidate its crypto-friendly bank.

The comparatively small size of the move suggests that crypto currency investors priced the news in the past week when the firm first warned it may not be able to continue operating and it closed down the SEN, or Silvergate Exchange Network, as per Conor Ryder, research analyst at Kaiko.

The declines intensified by Thursday afternoon, though, after shares of SVB Financial, whose Silicon Valley Bank, which largely banks tech startups, announced a plan to raise over $2b in capital to help offset losses on bond sales. Even though SVB has said it has least exposure to crypto, its requirement to recapitalize on the heels of the Silvergate event has connected the two events in some people’s minds.

Bitcoin and ether have held up comparatively well in spite of a testing macroeconomic environment — still the largest driver of crypto price action in spite of a decreasing correlation between crypto and stocks — and a string of problems for the space, including the recent Silvergate developments and the post-FTX regulatory clampdown on the industry that started in February. Even their single-digit declines on Thursday fade in contrast to the 60 per cent and 41 per cent drops suffered by SVB and Silvergate, respectively.

Bitcoin’s correlation with stocks is lower than it was for much of 2022 and its volatility has been near historic lows for the last few weeks.

Thursday’s move pushed bitcoin below the key technical level of $22,200. While some investors have welcomed bitcoin’s recent sideways movement in light of a series of negative industry developments, chart analysts have been looking for the crypto currency to close higher than $25,000 to give more meaning to its YTD gains, now nearly 30 per cent.