- The bitcoin price hit a two-week low as the industry's crucial banking partner faces financial troubles.
- Silvergate has experienced a strong downward trend in deposits, coupled with a 95% drop in share price over the past year.
- Bitcoin experienced its biggest drop in an hour since the FTX explosion in November.
Cryptocurrency markets are falling as the industry's once-benchmark bank grapples with a series of financial woes, which could threaten global cryptocurrency liquidity.
The bitcoin price hit a two-week low early Friday and experienced its biggest price drop in an hour since the explosion of the failing exchange FTX in November. The token is trading 4% lower at $22,394, per Messer.
Other major tokens followed suit. Ethereum lost 3%, falling to $1,573.
The market moves come after several companies like Coinbase, Circle, Galaxy Digital and Paxos cut ties with Silvergate, which is delaying its annual report due to higher losses, signaling doubts about the future of its business.
Many large digital asset exchanges work with Silvergate for inter-entity transactions, and a dent in those relationships could affect liquidity in the industry.
Silvergate became entangled with a series of failing companies like FTX, resulting in a massive decline in deposits at the bank amid broader crypto market contagion. Silvergate shares have fallen 95% in the last year.
โFears are growing that a crypto-focused bank failure could deal a further blow to investor confidence after major crypto player bankruptcies over the past few months,โ Wael Makarem, senior market strategist at the broker, told Insider. of Exness Investments. "As a result, the market could be exposed to further price corrections, while investors could be concerned about a potential impact on other market players."
Makarem added: โThis incident could strongly affect the recent market rally as cryptocurrencies remain in a delicate position. Furthermore, the decline in the number of companies operating in crypto could raise concerns.โ
The total market capitalization of cryptocurrencies exceeds $1 trillion, according to Messari, about two-thirds below its all-time high in November 2021. Investor confidence in digital assets was hit last year by a series of bankruptcies of cryptocurrency companies, along with rising borrowing costs from an aggressive Federal Reserve.
Sentiment may have deteriorated further in cryptocurrency markets as traders brace for the Fed's next move to cut inflation, which remains above the central bank's target.
