• Silvergate Collapse Causes Further BTC, ETH Losses
• Bitcoin dropped from $22,300 to just over $20,000
• Many warnings signs around the present aura of Silvergate
Silvergate Collapse Affects Crypto Assets
The recent news of the collapse of Silvergate caused prices of many leading digital currencies – including bitcoin and Ethereum – to take serious dips during the early weeks of March. Bitcoin fell from about $22,300 to just over $20,000 after it was announced that Silvergate would be shutting down completely and liquidating its assets in the coming weeks.
Analysts Weigh In on Situation
Jaret Seiberg – an analyst at Cowen – explained in a recent note that there were plenty of warning signs surrounding the present aura of Silvergate. SVB Financial, for example, was attempting to raise more than $2 billion as a means of helping to offset potential losses due to bond sales. Conor Ryder – research analyst at Kaiko – also commented that bitcoin and other major cryptocurrencies have held up remarkably well throughout the turmoil.
Risk Factors For Banks
Seiberg noted that these warning signs make it difficult for bigger banks to service the crypto space as it is believed they concluded that the opportunity is not worth the regulatory risk. This will likely consolidate crypto exposure to a handful of smaller banks, which brings with it risks such as liquidity risk and concentration risk- two things banking regulators are trying to avoid.
Volatility Expected
Ryder mentioned that based on data collected there has been a spike in euro volumes for bitcoin versus dollars over the last week while there has been a decrease in liquidity on both USD crypto pairs and U.S. exchanges due to providers taking a wait-and-see approach before reentering markets. This lower liquidity will lead to more volatility in markets and bigger price moves up or down until further notice.
Conclusion
The death of Silvergate is just another name added onto the growing list of crypto firms who have fallen victim during bear conditions this past year. Investors are encouraged to remain cautious but also remember how well cryptocurrencies have managed despite this situation which could easily have gotten out of control if not properly prepared for beforehand