HomeBusinessBitcoin's fall on Thursday night, the biggest one-hour drop since FTX

Bitcoin’s fall on Thursday night, the biggest one-hour drop since FTX

Bitcoin plunged nearly 5% overnight from Thursday to Wednesday, following a belated Wednesday notice from major industry bank Silvergate Capital that cast doubt on the future of its business.

In line with Bitcoin, the total market cap for crypto assets fell 4.6% from $1.06 trillion to $1.02 trillion between 8:18 PM and 9:05 PM New York time.

Bitcoin has not fallen this fast and sharply since the price fell 4% from $20,538 to $19,704 on the morning of Tuesday, November 8 as FTT, the token for crypto exchange FTX, faced massive withdrawals.

Bitcoin (BTC-USD) changes hands at $22,381, down 4.3% in the past 24 hours and 6.4% in the past week.

“Following today’s drop, the pullback is close to 10%, and bitcoin is on track to close below its 50-day moving average (DMA) for the first time in nearly two months,” said a BeSpoke Friday report.

Over the past two days, the crypto market has come to grips with the possible bankruptcy of Silvergate, a bank serving the crypto industry.

“Fortunately, Silvergate is not an FTX. Silvergate is more of a fiat entry and exit point for US dollars than a major source of liquidity and volume for the entire crypto ecosystem,” said Michael Safai, co-founder and partner of crypto trading firm Dexterity Capital.

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Silvergate, headquartered in La Jolla, Calif., said in a late Wednesday post that it would further delay its annual report because of larger losses than it showed in January’s preliminary results, in addition to “certain regulatory and other investigations and investigations pending.” with respect to the Company” and its “ability to continue its business during the twelve months following the issuance of these financial statements,” according to the filing.

Through Thursday, major crypto exchanges and companies quickly distanced themselves from Silvergate. The shares of the bank (SI) fell 57% throughout the day from $13.50 to $5.78.

To further exacerbate Silvergate’s business challenges, Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, Crypto.com, Cboe Digital, GSR and Circle each issued a statement saying they have cut ties with what was once considered to be a crucial banking partner for the sector.

Circle, publisher of Stablecoin, added that it is “in the process of settling certain services with them.”

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Separately, Binance US and Kraken would not comment on their exposure to Silvergate.

“There is some dismay at the Silvergate news, but it is not clear that it would lead to strong selling,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, told Yahoo Finance on Friday.

Dexterity’s Safal agreed: “It’s more a case of jaded traders digesting the news and not wanting to be left with potential ticking time bombs, but not understanding how this differs from the 2022 collapse.”

Safai also suggested the reaction may have come from Asian markets reacting to the corporate exodus from Silvergate.

On Thursday, March 2, $203 million in bitcoin long positions were liquidated or $198 million excluding short liquidations — the most in a single day in three weeks — according to crypto derivatives aggregator Coinglass.

As Acheson noted in its Friday newsletter, given the small change in the ratio of ETH to BTC, bitcoin’s sharp decline hit “equally” the second-largest cryptocurrency ether. Ether is changing hands at $1,570 per coin, down less than 4% for the last day of the week as of Friday morning 8:30 AM New York time.

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Silvergate’s direct impact on crypto market liquidity is “very marginal at best,” Safai said. However, the worst-case scenario of the bank’s bankruptcy could damage confidence, leading some companies to withdraw capital from the market.

“That in itself could affect liquidity, but that wouldn’t have a ripple effect by itself, nor would it last very long,” Safai told Yahoo Finance.

More important to Acheson are the implications for access to banking if a traditional bank were to go under because of its crypto business.

“That would give regulators strong ammunition that crypto risks could become ‘systemic’ and that any financial institution serving the crypto industry could run into new barriers,” Acheson explained via a messaging app.

“Uncertainty is high at the moment,” she added.

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