Bitcoin, the world’s largest cryptocurrency, experienced an 8% drop to below $20,000 on Friday, marking its lowest point in nearly two months. This decline came after a sell-off in the U.S. stock market and the collapse of a lender that focused on cryptocurrencies. Over the course of 24 hours, the cryptocurrency market lost more than $70 billion in value. According to Coin Metrics, Bitcoin was last trading at $19,959.61, down 2.6%, while Ether had dropped over 3% to $1,400.63.
This sell-off in the crypto market can be attributed to several factors. Cryptocurrency prices have a close correlation with U.S. stock markets, particularly the tech-heavy Nasdaq, which saw a decline on Thursday. Additionally, U.S. Federal Reserve Chairman Jerome Powell’s indication that interest rates may remain higher than expected has caused concern. The raising of interest rates in the past year has weighed heavily on risk assets such as stocks and cryptocurrencies.
Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank, cited negative developments in the broader financial market and the crypto industry as reasons why there is little reason to buy bitcoin currently. Another factor weighing on crypto prices is the collapse of Silvergate Capital, a major lender to the crypto industry. Silvergate announced on Wednesday that it is winding down operations and liquidating its bank. FTX, a major cryptocurrency exchange that collapsed, was a large customer of Silvergate.
Silicon Valley Bank, a major bank in the technology start-up space, also sold off $21 billion worth of its holdings at a $1.8 billion loss, according to a late Wednesday announcement. SVB, which provides traditional banking services while funding tech projects, is considered a backbone of the venture capital industry in the U.S. The sale of assets comes as SVB grapples with a weaker technology funding environment as venture capitalists remain cautious amid a weaker macroeconomic situation and rising interest rates.
Both Silvergate and SVB invested in U.S. Treasuries, which have lost value as the Fed raised rates. As a result, these banks were forced to sell these bonds at a loss to shore up their capital positions. Vijay Ayyar, vice president of corporate development at crypto exchange Luno, believes that a combination of global macro and interest rate rises, as well as the exposure many banks have to long duration securities, have turned sentiment quite bearish.
Marine Corps Veteran-turned-national-tv-personality Eric Mitchell is a world leading expert in sports media, regularly appearing on the world’s largest outlets from BBC, MSNBC, Fox News, Bloomberg, CNN and more. His signature blend of snark and industry expertise landed him columns at none other than RollingStone, GritDaily, PopWrapped, Disrupt — and most recently — Editor in Chief at NFT Today Magazine. When he’s not making media appearances or running his empire at LifeFlip Media, he can be found entertaining his thousands of loyal followers on social media through his authentic filter-free content.