BTC reaches lowest point in 7 weeks, crypto market slides after Silvergate announcement

Quick Take

  • Bitcoin plummeted 6% to around $20,300, reaching its lowest point in around seven weeks. Ether was also down over 6% after a lawsuit against KuCoin brought by New York’s attorney general named the cryptocurrency as an unregistered security. 
  • Crypto stocks also fell sharply after news that Silvergate Bank will “wind down” its operations, with Microstrategy down 9.4%, Coinbase down 7.8%.

Cryptocurrency prices fell sharply throughout the afternoon, as investor sentiment was shaken following crypto-friendly bank Silvergate announcing it is liquidating. 

Bitcoin was trading around $20,325 by 5:15 p.m. EST, down about 6.4%, according to TradingView data — its lowest point in around seven weeks. Ether followed suit, dropping 6.2% to $1,437.

Altcoins also plunged, with the exception of stablecoins. After Silvergate's announcement, stablecoins are now being framed by investors as the primary on and off ramps for crypto trading.
Binance's BNB slipped 6.4%, Ripple's XRP was down 7.4%, and Polygon's MATIC shed 8.8%. 
Dog-themed meme coins were also down, with Shina Inu and Doge Coin down 11.3% and 10.3% respectively.

Crypto stocks & structured products

Silvergate shares fell rapidly throughout the day, tumbling 42.1% by market close to $2.84.

Silvergate announced its intention to wind down operations and voluntarily liquidate the bank on Wednesday, bringing an end to one of crypto's most prominent banks.

Crypto firms in the U.S. are down to one bank, Signature, said Brian Rudick, senior strategist at GSR.

"It's likely that only larger, existing crypto companies will have access to the banking system in the U.S., Rudick said, "while startups will struggle to access banking services."

In response, shares in smaller crypto banks fell sharply. Signature Bank dropped around 12% by market close, while Silicon Valley Bank lost around 60% of its value on the day.

Crypto stocks were also down significantly, with Microstrategy down 9.4%, Coinbase down 7.8% and Jack Dorsey's Block down 5.3% by market close.

"It was a rough afternoon for risk stocks in general," said Matt Kunke, junior strategist at GSR, with the S&P 500 falling about 2% in the last 3 and half hours of trading.

Part of the decline may be related to waning risk sentiment, he said, with investors reducing their risk ahead of tomorrow's release of U.S. nonfarm payroll numbers. 

Another factor may be the lawsuit initiated today against KuCoin by the New York Attorney General's office, Kunke said. The suit alleged that ETH is a security, "heightening regulatory tensions that have been in focus all month." ETH's value began sliding shortly after the news broke. 

Grayscale's GBTC was also down significantly on the day, dropping 10.8% by market close.

Grayscale bounced back earlier in the week after it met the Securities and Exchange Commission in court on Tuesday. The asset manager brought the case against the SEC for rejecting its proposal to convert its flagship fund, GBTC, into a spot bitcoin ETF in June of last year.

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