• Silvergate’s closure has caused Bitcoin and Ethereum prices to dip during the early weeks of March.
• SVB Financial was attempting to raise more than $2 billion as a means of helping to offset Silvergate’s losses.
• Kaiko research analyst Conor Ryder noted that Bitcoin and other major cryptocurrencies have held up remarkably well throughout the turmoil.
Silvergate Collapse Causes Further Crypto Losses
The recent announcement by Silvergate Capital that it will be winding down its operations and liquidating its assets has led to a dip in the prices of leading digital currencies such as Bitcoin and Ethereum. Prices fell from around $22,300 for Bitcoin to just over $20,000 following this news.
Warning Signs Appeared Beforehand
Jaret Seiberg, an analyst at Cowen, noted that there were plenty of warning signs preceding this event. SVB Financial – a Silicon Valley-based bank providing funds to tech startups – attempted to raise more than $2 billion in order to offset the losses from bond sales but was unable to do so. Seiberg commented that this made it difficult for bigger banks to service the crypto space due to the regulatory risks associated with it, resulting in a consolidation of crypto exposure into fewer smaller banks with an increase in liquidity risk and concentration risk.
Cryptocurrencies Remain Resilient
Despite these events, Conor Ryder – research analyst at Kaiko – pointed out that Bitcoin and other major cryptocurrencies have not been significantly impacted by this development. He noted that while euro volumes increased against USD exchanges and liquidity on both USD pairs and U.S.-based exchanges decreased as liquidity providers took a wait-and-see approach, he believes this could lead only lead to minor price movements rather than large ones in the short term.
Notable Closures Amongst Crypto Firms
Silvergate’s closure follows several other crypto firms which were forced into bankruptcy or shut down due companies such as Three Arrows Capital and BlockFi suffering from bear market conditions during 2022. These events demonstrate how fragile the current climate is for digital assets, despite their resilience so far throughout Silvergate’s collapse.
The closure of Silvergate shows how quickly fortunes can change in the world of digital assets – despite other coins holding up relatively well through this period – highlighting just how important it is for investors operating within such markets remain vigilant when making any decisions regarding their portfolios