Crypto Market Slumps After News of Silvergate Troubles and Fed Rate Hikes
By On Thursday evening and Friday morning, the worth of cryptocurrencies decreased drastically due to the recent news of Silvergate Capital, the institution which supports a lot of crypto's leading players, losing significant customers and being on the edge of bankruptcy.[0] Bitcoin fell 4% to $22,385 from Thursday morning to Friday, hitting a 16-day low, while Ethereum also slid 3% overnight.[0]
The Federal Reserve, tasked with ensuring price stability and maximum employment in America, is projected to declare a raise in interest rates at its upcoming gathering, beginning on March 22, 2023.[1] Since early 2022, the Federal Reserve has been increasing interest rates in response to some of the highest inflation levels recorded in the last 40 years.[2] Chairman Jerome Powell indicated earlier this month that further rate increases are likely as the economy continues to make strides.[2]
The news of Silvergate's financial woes put further pressure on the cryptocurrency market.[3] Many of Silvergate's major clients, such as Coinbase (COIN 1.27%), announced they would stop using the bank, and Silvergate's stock fell a whopping 58% and is down nearly an additional 11% today, trading around $5 per share.[4] CoinMarketCap data showed that Bitcoin dropped 1.45% in the last 24 hours to US$23,172 as of 8 a.m. in Hong Kong, and had declined 5.23% in the last seven days.[0] Ether dropped 1.69% to US$1,606, resulting in a 3.[5]
Silvergate, as a Federal Reserve member bank, has positioned itself as a bridge between traditional finance and the world of cryptocurrency.[4] The bank experienced a US$1 billion loss for the fourth quarter of 2022 due to the FTX collapse.[6] In January, 40% of its staff were laid off.[6] Silvergate felt immense pressure due to the uncovering of the scandal and subsequent bankruptcy of FTX, a major client of theirs.[7]
Ratio of Bitcoin Exchange Whale. CryptoQuant is a[8]
CryptoQuant analyst abramchart reports that whale activity is increasing on Bitcoin spot exchanges. The Whale Ratio for Bitcoin Exchanges – a measure that looks at the top 10 Bitcoin inflows into exchanges relative to the total number of exchange inflows – increased to 0.78 on March 1st, up from approximately 0.5 in the previous month. Bitcoin funding rates, all exchanges | CryptoQuant is a[9][8]
In the last 24 hours, the overall crypto market capitalization declined by 1.02%, bringing it down to US$1.[10]
0. “Latest Crypto Collapse: Bitcoin And Ethereum’s Losses Top $24 Billion As Silvergate Unravels” Forbes, 3 Mar. 2023, https://www.forbes.com/sites/dereksaul/2023/03/03/latest-crypto-collapse-bitcoin-and-ethereums-losses-top-24-billion-as-silvergate-unravels/
1. “Higher Than Expected PCE Numbers Push Bitcoin Down” BeInCrypto, 24 Feb. 2023, https://beincrypto.com/pce-numbers-push-bitcoin-down/
2. “Bitcoin Falls 3% As PCE Rises 0.6% in January” CryptoPotato, 24 Feb. 2023, https://cryptopotato.com/bitcoin-falls-3-following-as-pce-rises-0-6-in-january
3. “Bitcoin Delivers Major Bullish Signal for First Time in Over a Year” Royals Blue, 1 Mar. 2023, https://royalsblue.com/bitcoin-delivers-major-bullish-signal-for-first-time-in-over-a-year
4. “Why Shiba Inu, Solana, and Cardano Are Falling Today” The Motley Fool, 2 Mar. 2023, https://www.fool.com/investing/2023/03/02/why-shiba-inu-solana-and-cardano-are-falling-today/
5. “Bitcoin, Ether fall; Polkadot leads losers among top ten tokens” Yahoo Life, 1 Mar. 2023, https://www.yahoo.com/lifestyle/bitcoin-ether-fall-polkadot-leads-024635928.html
6. “Bitcoin slides below US$23,000 in broad crypto price slump” Forkast News, 3 Mar. 2023, https://forkast.news/headlines/bitcoin-below-23k-ether-slides-price-slump/
7. “Why Bitcoin, Ethereum, and Shiba Inu Are Falling Today” The Motley Fool, 3 Mar. 2023, https://www.fool.com/investing/2023/03/03/why-bitcoin-ethereum-and-shiba-inu-are-falling-tod/
8. “Bitcoin Saw Low Volatility During the Month of February” ETF Trends, 3 Mar. 2023, https://www.etftrends.com/crypto-channel/bitcoin-saw-low-volatility-during-the-month-of-february
9. “Bitcoin Funding Rate Turns Negative, Short Squeeze Incoming?” NewsBTC, 3 Mar. 2023, https://www.newsbtc.com/news/bitcoin/bitcoin-funding-rate-turns-negative-short-squeeze-incoming/
10. “Bitcoin, Ether fall along with most top 10 cryptos amid potential for larger interest rate hikes” Yahoo Life, 2 Mar. 2023, https://www.yahoo.com/lifestyle/bitcoin-ether-fall-along-most-093353901.html
