Bitcoin Plunges 7% as Crypto Market Drops Below $1 Trillion
On Friday, the leading crypto by market cap, Bitcoin, dropped below $20,000 for the first time since January 14, according to data from CoinGecko. But as of Saturday morning, the most famous digital coin managed to recoup some losses and is currently trading at $20,336.
The second biggest crypto by market cap, Ethereum, followed a similar pattern as its price fell to levels not seen in two months on Friday before posting 2% gains in the past 24 hours. Ethereum is trading at $1,460 as of this writing.
The latest downward movement in many leading cryptocurrencies caused the broader market cap to drop below $1 trillion, the lowest since January 20.
Silvergate’s Collapse Fuels Crypto Market’s Decline
The crypto industry has faced several drawbacks in recent weeks, including the downfall of crypto-friendly bank Silvergate, which announced it would shut down operations in the coming days. The sudden closure of this financial institution is arguably one of the major drivers behind the current downturn.
Silvergate has played a massive role in the crypto industry by helping investors channel fiat currencies into crypto exchanges, crypto venture capital funds, crypto projects, and crypto hedge funds. In addition, the bank was committed to settling balances between its clients on any day, including public holidays and weekends.
Clara Medalie, the Director of Research at Kaiko, says Silvergate’s downfall has had a significant impact on market sentiment. She adds that it could diminish the willingness of financial institutions to work with crypto companies, essentially pulling the industry back to 2017 when these companies struggled to establish banking relationships.
According to Medalie, reduced fiat on-ramps will give institutional investors a hard time transferring funds into the crypto market, which could have a broader impact on market efficiency and liquidity.
Bearish Pressure Beyond Silvergate Bank
Besides Silvegate, the US authorities have also added pressure on the emerging industry in the past few days, with Treasury Department proposing a 30% excise tax on the powering cost of Bitcoin mining facilities last week. Meanwhile, New York Attorney General’s office leveled securities law violation charges against crypto exchange Kucoin on Thursday.
COO of crypto exchange BTSE Jeff Mei claims that the Treasury Department’s decision to impose a 30% tax is purposed to discourage mining activity within the US and has definitely played a big role in the latest downtrend.
Mei also says the New York Attorney General’s lawsuit against Kucoin, along with Fed chair Jerome Powell’s hawkish comments in regard to a possible hike in interest rate, have contributed to the market’s downturn.
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