(Bloomberg) — Bitcoin fell to its lowest level in about two weeks, as part of a broader pullback in crypto markets as investors processed the unraveling of a major payment network in the industry.
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The largest token fell as much as 6% before splitting part of the slide to trade 4.4% lower at $22,380 as of 8:30am Friday in London. Smaller coins like Ether, Avalanche and the meme token Dogecoin also suffered declines.
The digital asset industry is absorbing the fallout from the troubles with crypto-friendly US bank Silvergate Capital Corp., which has said it is assessing whether it can remain viable. The bank offers a widely used payment network that enables the real-time transfer of money between crypto companies. But many digital asset exchanges, stablecoin issuers, and trading desks no longer accept or initiate payments through Silvergate.
“Silvergate is one of the premier providers of US dollar banking for the crypto industry,” said John Toro, head of trading at Digital Asset Exchange Independent Reserve. “Any liquidity issues will have a direct impact on market conditions and may affect access to and availability of some client funds.”
The Silvergate woes are the latest example of the contagion caused by the collapse of the FTX crypto exchange in November. The bank suffered a run on deposits last year in the wake of the bankruptcy of FTX, a major client.
The digital asset sector is also grappling with broader regulation in the US and expectations that interest rates will stay high longer to fight inflation, undermining risk appetite.
Bitcoin’s fall brought some major technical levels into focus. The token has dropped below its 50-day moving average, raising the risk of further declines for some chart analysts.
Crypto investors often turn their sights to Tether, the largest stablecoin, during periods of market stress. The token is intended to have a constant value of $1 and is widely used to facilitate digital asset trading, but questions have long been raised about the composition of the reserves underlying the peg.
The stablecoin does not have any exposure to Silvergate, Paolo Ardoino, chief technology officer at Tether, said on Twitter.
Hayden Hughes, co-founder of social trading platform Alpha Impact, said he detected “heavy buying” of Tether over a five-minute period during Friday morning’s trading session in Asia. “We saw a strong defense,” said Hughes, adding that it was “probably by a market maker.”
Bitcoin’s 2023 recovery has cooled to 35%, still well above the 4% return of global equities. Crypto markets endured a $1.5 trillion defeat last year amid tightening monetary policy and a series of blowouts that exposed high counterparty risk.
–With help from Akshay Chinchalkar, Sidhartha Shukla and Suvashree Ghosh.
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