Bitcoin
and other cryptocurrencies were falling Thursday, under pressure but holding key levels amid signs of distress at
Silvergate Capital,
an influential banker to the digital asset industry.
The price of Bitcoin has declined 1.5% over the past 24 hours to $23,400. The largest crypto has consolidated between $23,000 and $24,000 in recent weeks, stagnating somewhat after a rally to start 2023 saw it jump from around $16,500 to as high as above $25,000—its best levels since last summer.
“Bitcoin continues to find support as it falls to $23,000, an impressive result amid falling markets and a stronger dollar,” said Alex Kuptsikevich, an analyst at broker FxPro. “Significant signal levels on the way down for Bitcoin appear to be around $22,700, where the 50-day moving average and the local lows from late last week are concentrated.”
A decline in digital asset prices may come as traders monitor trouble at Silvergate (ticker: SI), a federally insured U.S. bank that has positioned itself as a linchpin of institutional crypto. Silvergate detailed in filings late Wednesday that it was delaying submitting its annual report to the Securities and Exchange Commission, which has prompted a dramatic fall in the company’s already beaten-down stock price.
Silvergate reported a $1 billion loss in the fourth quarter after selling securities at fire-sale prices to stave off a bank run. The company said in its filing that it sold additional securities in January and February and expects to record further losses.
This will negatively impact the bank’s capital ratios and could result in it being “less than well-capitalized,” the company said. Silvergate also said it was evaluating its ability to continue as a going concern and is “in the process of re-evaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”
It looks like an existential threat for Silvergate that could confirm regulators’ fears that crypto poses a danger to the financial system, risking further headwinds for an industry that has been under strain from regulatory pressures over the past year.
A crisis at Silvergate also could hit crypto markets since the bank facilitates key transfers between exchanges and market makers—which do much of the buying and selling of Bitcoin and other tokens—potentially exacerbating existing liquidity issues. That could see crypto getting even more volatile.
More broadly, Bitcoin and its peers are likely to keep taking their cues from the stock market, where the
Dow Jones Industrial Average
and
S&P 500
have been floundering as investors worry over inflation and the future of interest rates. Cryptos vastly outperformed stock at the start of the year—bucking the macro-driven correlation between digital assets and equities—but have since fallen back into step.
“At best, we’ll likely see Bitcoin and crypto trade sideways until both the macro and regulatory fronts shift in a more positive direction,” said Quinn Thompson, the head of growth and capital markets at Maple, a blockchain trading platform. “At worst, we could be in for another leg down. Most market participants, therefore, increasingly look to be taking a more cautious approach for the time being.”
Beyond Bitcoin,
Ether
—the second-largest crypto—lost less than 1% to below $1,650. Smaller cryptos or altcoins were weaker, with
Cardano
crumbling 2.5% and
Polygon
plunging 3.5%. Memecoins were also in the red, with
Dogecoin
down 2% and
Shiba Inu
shedding 3%.
Write to Jack Denton at jack.denton@barrons.com
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