The crypto market is deep red on Friday, March 10, 2023. The Bitcoin price fell by eight percent and slipped below the $20,000 mark. The other well-known cryptocurrencies also posted similarly high losses.
Within 24 hours, around $70 billion was wiped out in terms of market capitalization.
One of the reasons for the sudden price slide is the announcement by the US bank Silvergate Capital, which specializes in cryptocurrencies, that it will cease operations. Reason: the “recent industry and regulatory developments”.
Silvergate is a late victim of the bankruptcy wave in the crypto industry that has been going on since summer 2022. However, the last tipping point was the FTX bankruptcy in November 2022. Silvergate and FTX were closely linked. The crypto bank’s payment difficulties had been apparent for some time.
On the crypto market, which started 2023 with strong growth after the FTX shock, the news about the end of Silvergate at least made it clear that the crypto winter is not over yet.
In addition, the US institute Silicon Valley Bank, which specializes in the tech sector, pointed to an enormous financial imbalance on Thursday. The prominent start-up financier from Silicon Valley has meanwhile had to announce the closure.
Investors see this as a sign of exceptional caution among venture capitalists, a poor macroeconomic situation and the fear of higher interest rates.
The interest rate fear that is currently keeping both the crypto and stock markets in suspense – higher interest rates mean less investment in risky assets – had also been further fueled this week.
Fed Chair Jerome Powell had hinted that interest rates could rise higher-than-expected and stay high for longer CNBC writes. The nervous investors then saw the US labor market data published on Thursday as a possible sign of – from the Fed’s point of view – necessary interest rate hikes.
There are fears that the situation on the US labor market, which is better than expected, could ensure that inflation is further fueled.
For Yuya Hasegawa, analyst at the Japanese crypto company Bitcoin, this means: stay away from Bitcoin and Co. “There is currently little reason to buy Bitcoin. The market is saturated with negative developments,” said Hasegawa. This applies not only to the crypto industry, but to the entire financial market.
Vijay Ayyar from the crypto exchange Luno sees it similarly. Sentiment appears to have turned bearish overall, Ayyar told CNBC. In addition to the combination of macro developments and interest rate increases, the banks’ exposure to securities with long maturities is also responsible for this.
Two dates in the coming week should be decisive for how the courses on the crypto and stock markets will continue in the short term. On Tuesday, March 14th, new inflation figures will be released from the US.
Another meeting of the Federal Open Market Committee will also take place on Wednesday, March 15, from which investors expect initial indications of how the Fed will proceed with its interest rate policy.
Let’s see in which direction the prices for shares and cryptocurrencies will swing. Currently, forecasts for interest rate hikes in particular seem to be causing movement on the markets.