Bitcoin drops below $20,000; $70 billion wiped off the crypto market

Bitcoin is under pressure as the Federal Reserve has indicated that interest rates could rise higher than expected and after a major crypto-focused lender, Silvergate Capital, collapsed.

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Bitcoin fell below $20,000 on Friday, hitting a nearly two-month low, following a sell-off in the U.S. stock market and the collapse of a crypto-focused lending company.

The crypto market has seen over $70 billion wiped out of value within the 24 hours to 5:12 a.m. ET.

Bitcoin was trading down nearly 8% at $19,900.28 as of 5:11 a.m., according to CoinDesk data. ET. ether fell more than 8% to $1,400.63.

The crypto sell-off has been driven by a number of factors. The movement of cryptocurrency prices is quite closely correlated with the US stock market, especially the tech-heavy market. Nasdaq. On Thursday, main US indices close lower.

On Tuesday, US Federal Reserve Chairman Jerome Powell shown that interest rates could go higher—and stay higher—than expected. The increase in interest rates over the past year has affected risky assets such as stocks and especially cryptocurrencies.

“There is little reason to buy bitcoin right now as the market is saturated with negative developments, not just industry-specific,” said Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank. cryptocurrency industry but also to the broader financial market.” CNBC via email.

Bank worries

Another major factor affecting crypto prices was the collapse of Silvergate Capital, a major lender to the crypto industry. Silvergate said Wednesday that end of activity and liquidate your bank.

The collapse of Silvergate is another example of the collapse of major crypto exchange FTX that continues to have an impact on the industry. FTX is a major Silvergate customer.

Separately, Silicon Valley Bank said late on Wednesday that it sold off its $21 billion worth of shares at a loss of $1.8 billion. SVB is a big bank in the tech startup space. Offering traditional banking services while also funding technology projects, it is considered the backbone of the venture capital industry in the US.

The asset sale comes as SVB grapples with a weaker technology funding environment as VCs remain cautious amid weaker macroeconomics and rising interest rates.

Both Silvergate and SVB put money into US Treasuries, which have depreciated when the Fed raises interest rates. These banks were forced to sell these bonds at a loss to strengthen their capital positions.

Vijay Ayyar, vice president of business development at crypto exchange Luno, told CNBC: “Overall, sentiment seems to have turned quite negative due to the combination of global macros and rising interest rates. , but there are also many banks that may be exposed to long-term securities.” email.

Silicon Valley Bank CEO urges investors to stay calm, even as stocks plunge


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