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Bitcoin Struggles At 22K Post Silvergate’s Crisis

Silvergate Bank has seen a devastating decline, with shares of its stock plunging to an all-time low on Friday and erasing over $7 billion from the company’s market capitalization. 

Silvergate Capital Corp, a crypto-friendly lender, has encountered turbulent waters after its fourth quarter financials revealed staggering losses of one billion dollars.

The bank announced Friday that it would be ending the Silvergate Exchange Network with immediate effect. This potential move signifies an imminent shutdown of their services and operations in the near future.

Stocks dipped 11%, sending shockwaves throughout not just their sector but also the Bitcoin and various other cryptos too.

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Impact On The Bitcoin Price

Despite numerous attempts, BTC has yet to break the $25,000 threshold  but analysis suggests that this resistance is part of a larger shift out of bearish conditions. This could mark a new chapter for crypto investors.

Bitcoin traders’ high expectations were quickly doused as on-chain metrics took a turn for the worse in early March.

With current market conditions, short sellers could make big profits if BTC leads another bearish consolidation towards $19K, an ominous prediction that may become reality sooner than later.

Despite some analysts expecting Bitcoin to reach the ambitious $25,000 mark in the near future, many on-chain indicators are pointing towards this being difficult to achieve.

Yet hope remains that BTC may still rally and provide a good boost for crypto enthusiasts.

BItcoin Price chart

Bitcoin Price: $22,467.32

Market Factors

Investors are confronted with a perplexing macroeconomic dilemma, as high inflation and Fed rate hikes threaten their Bitcoin investments. 

To make sense of this situation, investors must consider the time value of money (TVM) when it comes to their BTC holdings. 

Fortunately, there is an on-chain way to measure TVM: by grouping together holders according to the amount of time they have held Bitcoin and averaging out their acquisition cost.

Recent buyers of Bitcoin have been rewarded for their investment decisions as the average realized price across all BTC holders is currently above $19,800, putting them in a profitable spot. 

Those who entered within the past six months are sitting even higher at an impressive average cost per coin of just over $21k, likely positive about such a fruitful timing.

On the other hand, for those who have held onto their Bitcoin for more than six months, they may realize gains if Bitcoin hits $25k. 

With BTC trading near $23,500 a symbolically significant benchmark, holders can sense that now may be time to break out and capitalize on long-term gains before prices potentially rise even further.

In order to hold its own against short-sellers, Bitcoin must generate new long liquidity as well as spot buyers. Exchange net flows offer a good measurement of these newcomers; however, current levels are still 34% lower than the daily average for 2023. Thus far  only $1.6 billion compared to 2021’s figure.

It remains imperative that greater interest continues in crypto if it is going to stand up staunchly against risk assets influenced by fluxes in the U.S Dollar Index (DXY) and interest rates.

Analysts are raising concern that the effort to clamp down on banks that work with crypto-focused companies is hindering access to vital new liquidity for the cryptocurrency market.

Without these resources, this dynamic and growing sector could be threatened by stagnation.

Silvergate Crisis

Silvergate Capital Corp suffered a sharp decline on Monday, with its shares dropping 11%. The bank had suspended their crypto payments network and openly questioned the sustainability of it. 

Crypto-related stocks weren’t far behind in the following suit – Signature Bank fell 2.5%, while MicroStrategy declined 3.8% and Coinbase Global slipped 2.7%. 

Ebang International registered the largest drop amongst them all at 8.4%, closing out an otherwise eventful day for players within this rapidly evolving sector of finance and technology.

Silvergate, a bank specialized in cryptocurrency services, brought their main product to an abrupt halt. Analysts suggest this could be the start of winding down operations as customers were particularly drawn to the flagship service that was suddenly cut off. 

What will happen next for Silvergate is uncertain but it’s sure to have wide-reaching implications on crypto banking and investors alike.

Silvergate Shares Fall

Silvergate Bank has seen a stunning collapse, with shares of its stock plunging to an all-time low on Friday and erasing over $7 billion from the company’s market capitalization. 

This news sent shockwaves through cryptocurrency markets as well, driving Bitcoin and Ethereum down almost 5%.

Silvergate's crisis

5-day price movement

Declining Profits

Silvergate Bank is on the brink of disaster and its investors have been left reeling. The company took a devastating financial blow of one billion dollars in the final quarter, leaving its future uncertain.

Analysts reveal liquidation value to be only $5 per share, a concerning 13% reduction from their previous close price. 

Following this crash in confidence, trusted crypto giants such as Coinbase Global are refusing partnership with the firm after one too many hefty withdrawals last year – namely $8 billion leaving FTX exchange alone within three months following November!

Summary

After over two years of a tumultuous bear market, Bitcoin may finally be breaking through the clouds with promising signs that brighter days are on the horizon.

February saw some bumps in its path but optimists believe we’ve been slowly making our way out of this long stretch. Traders hope for continued progress!

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Disclaimer:

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.