Bitcoin Sinks to Two-Week Low as Silvergate Fallout Hurts Crypto

Bitcoin dropped to the lowest level in about two weeks, part of a wider retreat in crypto markets as investors digested the unraveling of a key industry payments network.

The market value of Bitcoin sank as much as 6% before paring some of the slide to trade 4.6% lower at $22,347 as of 6:30 a.m. Friday in New York. (REUTERS)

Bitcoin dropped to the lowest level in about two weeks, part of a wider retreat in crypto markets as investors digested the unraveling of a key industry payments network.

The largest token by market value sank as much as 6% before paring some of the slide to trade 4.6% lower at $22,347 as of 6:30 a.m. Friday in New York. Smaller coins such as Ether, Avalanche and the meme token Dogecoin also suffered declines.

The digital-asset industry is absorbing the fallout of the troubles at crypto-friendly US bank Silvergate Capital Corp., which has said that it's reviewing whether it can remain viable. The bank offers a widely used payments network that facilitates the real-time transfer of funds between crypto firms. But many digital-asset exchanges, stablecoin issuers and trading desks are no longer accepting or initiating payments through Silvergate.

“Silvergate is one of the main US dollar banking providers for the crypto industry,” said John Toro, head of trading at digital-asset exchange Independent Reserve. “Any liquidity concerns will have a direct impact on market conditions and may affect the access and availability of some client funds.”

Silvergate's woes are the latest example of the contagion caused by the collapse of the FTX crypto exchange in November. The bank suffered a run on deposits last year in the wake of the bankruptcy of FTX, which was a key client.

The digital-asset sector is also contending with a broader regulatory clampdown in the US as well as expectations that interest rates will stay higher for longer to fight inflation, sapping risk appetite.

Bitcoin's tumble brought some key technical levels into focus. The token has dropped below its 50-day moving average, which for some chart analysts adds to the risk of further declines.

Crypto investors often turn some of their gaze to Tether, the largest stablecoin, during periods of market stress. The token is meant to have a constant $1 value and is widely used to facilitate digital-asset trading, but has long faced questions about the makeup of the reserves underpinning its peg.

The stablecoin doesn't have any exposure to Silvergate, Paolo Ardoino, chief technology officer at Tether, said on Twitter.

Hayden Hughes, co-founder of social-trading platform Alpha Impact, said he detected “heavy buying” of Tether over a five-minute span in the Friday morning trading session in Asia. “We saw a strong defense,” Hughes said, adding that it was “probably by a market-maker.”

Bitcoin's rebound in 2023 has cooled to 35%, still comfortably above the 4% return from global stocks. Crypto markets last year endured a $1.5 trillion rout amid tightening monetary policy and a series of blowups that exposed high counterparty risk.