On March 1, the crypto market capitalization (TOTALCAP) was rejected by the $1.04 trillion resistance area. This produced an extended upper wick (red icon). After that, a decline began, which accelerated on March 3. The Bitcoin price is down today as crypto markets react to fresh FTX fallout, and BTC bulls are unable to defend already fragile support.
Crypto market plummets – here is why
Bitcoin dropped 5% in a single hour during the overnight hours of March 3rd, falling to its lowest level in over a week. The largest crypto joined Ether tickers down $1,569, and other major altcoins are in a steep decline fueled primarily by concerns regarding Silvergate bank.
Analysts continue to observe the movement after BTC/USD maintained $22,000 as support. Others believe Bitcoin is still due for a deeper retracement, while some are urging calm.
Bitcoin and Ether prices fell during Friday morning trading in Asia, along with the top 10 non-stablecoin cryptocurrencies, as rumors circulated that Silvergate Capital Corp., a U.S.-based cryptocurrency bank, could be the next corporate victim of the FTX crash. Polkadot led the decline.
After a week of fluctuations due to contradictory Federal Reserve comments about interest rates and data indicating that inflation is firmly established in the economy, U.S. stocks increased on Thursday.
Silvergate falls under the FTX crash spell
The Silvergate bank is the primary topic of conversation and a source of suffering for Bitcoin bulls. As a result of the possibility that Silvergate may be insufficiently capitalized, many of the most prominent names in the crypto industry have begun reducing or terminating their partnerships with Silvergate.
In a filing with the United States Securities and Exchange Commission (SEC) this week, the bank announced the postponement of its annual 10-K report. In addition, Coinbase, an American cryptocurrency exchange, announced that it had ceased using Silvergate, and Crypto.com followed suit.
Circle, a major stablecoin provider, subsequently stated that it was “sensitive to Silvergate’s concerns” and was in the process of disassembling certain services with them. The incident is the latest in a protracted calamity that began with the bankruptcy of the FTX exchange, to which numerous crypto firms had significant exposure.
The crypto industry has struggled for a long time to gain easy access to traditional banks, the majority of which remain wary of the volatility of digital assets and the potential for regulatory pressure. Silvergate attempted to fill the void but fell victim to the contagion caused by the November collapse of the FTX exchange.
Several exchanges cut ties with Silvergate
Circle Internet Financial, the issuer of the USDC stablecoin, announced on Twitter on Friday that it is withdrawing from “certain services that involve” California-based cryptocurrency bank Silvergate Capital Corp., joining a growing list of companies severing ties with the financially troubled U.S. bank.
On Thursday, Silvergate stock fell 57.7% in response to the news, and global cryptocurrency firms Crypto.com, Coinbase, Gemini, and Galaxy Digital severed business ties with Silvergate as a banking partner.
According to its January earnings report, the company posted a net loss of $949 million in 2022, compared to a net income of $75,5 million the previous year. The company attributed the losses to a “confidence crisis” in the industry.
Bitcoin’s price was already in trouble – Market liquidations
According to some traders, Bitcoin’s decline was already imminent. Official reports indicate that BTC price action has spent weeks attempting and failing to overcome resistance above $25,000, resulting in its most stagnant month on record.
A decline was not unexpected, with whale liquidity on exchanges possibly also contributing to the absence of organic price movements. According to the trading resource Skew, a single transaction was responsible for the majority of the sharp decline to multi-week lows in BTC/USD.
Long liquidations reached multi-month highs on March 3, illustrating how unprepared the majority of traders were for a pullback. At the time of writing, Coinglass data indicates that BTC’s long liquidations alone totaled $72.9 million. Cross-crypto liquidations stood at $205 million.
Stock markets affect the crypto market
President of the Atlanta Fed Raphael Bostic indicated on Thursday that he supports a 25 basis point increase in interest rates in March, alleviating recent concerns that the Fed may increase rates by 50 basis points. This contributed to a rise in stock prices, but the market is in a state of flux, as Fed Governor Christopher Waller stated on the same day that recent data indicates the inflation battle is far from over.
Initial jobless claims decreased in the week ending February 25, according to data released by the U.S. Department of Labor on Thursday. However, labor costs increased, indicating that the Fed’s interest rate hikes have not yet quelled inflation.
In February, the Federal Reserve raised interest rates from 4.5% to 4.75%, the highest level since October 2007. The CME Group predicts that the Fed will raise rates by another 25 basis points this month, with a 72.3% chance. They also predict a 27.7% chance of a 50 basis point increase, down from 29.9% on Thursday.
Data from the US services industry is expected soon, and several other Fed officials will be speaking on the same day, adding to the market’s confusion. Separately. Additionally, China will hold its “Two Sessions” this weekend, the most important political gathering of the year for determining economic policy in the world’s second-largest economy.