Bitcoin’s wings were clipped overnight as it fell 5% and dropped to a 16-day low of $22,267.
The price on Friday morning recovered slightly, to about $22,300, while the second-most-popular cryptocurrency, Ether, had fallen about 3.5%, to $1,567, over 24 hours.
The lackluster day for the world’s most popular cryptocurrency is a setback for investors who seemed increasingly hopeful that it would soon cross the $30,000 threshold, a feat not accomplished since May. Last month, Bitcoin briefly broke $25,000 after months below that level.
Partly to blame for Bitcoin’s nosedive on Friday are the negative results from crypto-focused bank Silvergate Capital. The firm reported a net loss of $1 billion on Tuesday, and on Thursday, the biggest U.S.-based exchange, Coinbase, said it would no longer accept or initiate payments to or from Silvergate. New York-based crypto company Paxos also distanced itself. Silvergate’s stock has crashed more than 60% over the past five days.
Still, Michael Safai, a managing partner at the crypto trading firm Dexterity Capital, said in a statement to Fortune that the market effects of the Silvergate news should be short lived.
“This is news we knew about for the entirety of the U.S. trading day, but it wasn’t until Asia came on that things started to plunge,” Safai said in the statement. “It’s more a case of jaded traders digesting the news and not wanting to be left holding any potential ticking time bombs, but not understanding how this differs from the collapses of 2022.”
Unlike the collapse of FTX, which led to its own steep decline in the price of Bitcoin, Silvergate is not a key source of liquidity for the crypto ecosystem.
“Silvergate’s direct impact on market liquidity is very marginal at best, and any impact would be psychological rather than material,” Safai added.
Yet, the psychological effects of Silvergate’s fall from grace could still greatly affect the fragile crypto market. A series of collapses from crypto hedge fund Three Arrows Capital to FTX, along with the frostbite of Crypto Winter, have plagued the industry over the last year. Bitcoin, which makes up just under half of the total crypto market share, is down 47% year-over-year, while Ether is down about 40% over the same period.
If Bitcoin fails to defend the $22,000 mark, it could shatter hopes of a recovery in the coming months, Bitbank crypto analyst Yuya Hasegawa wrote in a note.
“The next stop will likely be around $21.4k, where its February low and November high are converging,” Hasegawa wrote.
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