Silvergate Collapse Causes Crypto Prices to Plunge
• Silvergate is planning to shut down completely, causing the price of bitcoin and Ethereum to dip.
• Analysts believe this will increase liquidity risk and concentration risk for crypto assets, as fewer banks are willing to service the crypto space due to regulatory risks.
• Many other crypto firms have fallen victim to the bear market of 2022, including Three Arrows Capital and BlockFi.
Silvergate Collapse Causes BTC and ETH Losses
The recent news that Silvergate is planning to shut down has caused prices of leading digital currencies – such as Bitcoin (BTC) and Ethereum (ETH) – to take a dip in early March. Bitcoin fell from around $22,300 to just over $20,000 after the news was announced. Despite this drop in price, analysts believe bitcoin had anticipated something like this happening which helped shield traders from a more serious situation.
Risks From Silvergate Closure
Analysts such as Jaret Seiberg at Cowen have noted that there were plenty of warning signs leading up to Silvergate’s closure. SVB Financial, a Silicon Valley-based bank which provides funds for tech startups attempted to raise more than $2 billion in order to offset losses from bond sales. Seiberg believes this may mean only a few smaller banks will handle cryptocurrency exposure and thus create an increased risk of liquidity and concentration within the sector.
Other Crypto Firms Affected by Bear Market
Silvergate’s demise marks yet another company that has been affected by the bear market seen throughout 2022. Other companies include Three Arrows Capital and BlockFi who have also been casualties of these conditions.
Crypto Assets Holding Up Well
Despite all this bad news, Conor Ryder from Kaiko noted that Bitcoin and other major cryptocurrencies have held up remarkably well throughout it all. There was a spike in euro volume against USD over the last week due to lower liquidity on both U S exchanges and crypto pairs alike although this could lead to bigger price moves up or down in the short term due to less liquidation options available now.
The shutting down of Silvergate is certainly cause for concern regarding cryptocurrency investments but it appears that many digital assets have managed hold their value despite these trying times so far – though investors should remain cautious when investing going forward given the current instability within the sector