Bitcoin dropped quickly on Friday after speculators began to doubt the health of a major crypto firm, with the flagship cryptocurrency falling by about 5%.
The sharp sell-off comes as shares of crypto bank Silvergate Capital get hammered. Silvergate announced this week that it wouldn’t be filing its annual 10-K report on time, which is required by the Securities and Exchange Commission and details the company’s fiscal condition. Silvergate said that it would need a couple more weeks and is “currently analyzing certain regulatory and other inquiries and investigations.”
The delay is raising concerns that one of the biggest banks in the cryptocurrency space is struggling to stay in business. As of Friday morning, shares of Silvergate were down a staggering 64%. Even more shocking, the crypto bank has shed more than 95% of its value since the start of the new year.
“The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces,” Silvergate said about the situation.
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The bank said that there were a number of reasons for its struggles, including major cryptocurrency bankruptcies last year, the largest of which being FTX’s dramatic implosion, as well as general market volatility during the last part of 2022.
That uncertainty at Silvergate is now filtering down to anxiety in the cryptocurrency markets.
Bitcoin has declined to $22,300 after finally punching above $25,000 last month in what has generally been a good couple of months for bitcoin, which has seemed to be bounding back after sharp losses in the wake of the FTX collapse. Ethereum, the second-largest cryptocurrency, was off by about 3.7% on Friday and was hovering around $1,560.
Markus Thielen, the head of research at digital asset platform Matrixport, said the dips are closely tied to Silvergate’s flailing business operations.
“The drop is due to the continuous fallout from Silvergate Bank, as there is now more uncertainty about fiat on-and-off ramp,” he told Coin Telegraph. “In addition, there are now wider industry concerns that U.S. regulators are trying to cut off further banking relationships between crypto firms and FDIC-insured banks.”
This week aside, bitcoin and other major cryptocurrencies have had a year marked by recovery.
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On New Year’s Day, bitcoin was trading at about $16,500 and was generally below $17,000 for most of the time after FTX’s dramatic implosion in mid-November. But as of Friday, the flagship digital asset was trading up more than 35% from that time. Ethereum has grown by some 30% during that same period.
“The significant thing about this climb is this is back to the level it was before the FTX implosion for both bitcoin and ethereum,” John Berlau, a senior fellow and director of finance policy at the Competitive Enterprise Institute, recently told the Washington Examiner.
