Bitcoin And Ethereum’s Losses Top $24 Billion As Silvergate Unravels


Topline

Cryptocurrencies took a tumble late Thursday and early Friday after the latest unsettling news involving Silvergate Capital, the bank backing much of crypto’s largest players, losing major clients and teetering on the brink of bankruptcy.

Key Facts

Bitcoin fell 4% to $22,385 from Thursday morning to Friday, hitting a 16-day low, while ethereum also slid 3% overnight.

That slide wipes out $23.6 billion in market capitalization for the world’s two largest digital assets.

There wasn’t a “clear trigger” for the latest selloff, wrote bitbank analyst Yuya Hasegawa in emailed comments, but it appeared to be a delayed response to major crypto players like Coinbase, Circle and Paxos announcing Thursday afternoon they’d no longer use Silvergate’s financial services after the bank said in a Wednesday regulatory filing it was “less than well-capitalized.”

Shares of two of the largest crypto-exposed publicly traded companies, Coinbase and MicroStrategy, each tanked 4% in early trading amid an otherwise strong morning for stocks, as the S&P 500 rose 0.6% to build on Thursday’s gains.

Key Background

Founded in 1988, the California-based Silvergate rose to prominence over the last decade for its early willingness to work with crypto clients, reaching a valuation of about $6 billion at its November 2021 peak. But just as Silvergate rode the crypto boom to new heights, it grew exposed to the loosely regulated industry’s risks, with the high-profile bankruptcy of the exchange FTX spelling its own likely downfall. Silvergate endured an $8.1 billion run during the last three months of 2022 as clients panicked over Silvergate’s nine-figure dealings with FTX. Shares of Silvergate are down 98% from its November 2021 high and fell nearly 60% Thursday after its top clients jumped ship.

Crucial Quote

The recent crypto nosedive serves as “a reminder” of the “ripple effects” stemming from FTX’s collapse, which “undermined confidence” in the industry, Oanda analyst Craig Erlam wrote Friday.

What To Watch For

Should bitcoin slip below $22,000, it will likely sink to a six-week low of $21,400, Hasegawa predicted.

Further Reading

Crypto Crisis: A Timeline of Key Events (Wall Street Journal)

Was Silvergate on Borrowed Time as Regulators Backed Banks Away From Crypto? (CoinDesk)

Binance’s Asset Shuffling Eerily Similar To Maneuvers By FTX (Forbes)



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