- Bitcoin fell below $20,000 on Friday, hitting a nearly two-month low after a U.S. stock market selloff
- Another factor weighing on crypto prices is the collapse of Silvergate Capital, a major lender to the crypto industry. Silvergate announced on Wednesday that it was ceasing operations and liquidating its bank.
- Investors are also jittery after tech-focused Silicon Valley Bank said it sold $21 billion of its holdings with a loss of $1.8 billion.
Bitcoin is under pressure as the Federal Reserve signaled that rates could rise more than expected and after the collapse of a major crypto-focused lender, Silvergate Capital.
Jonathan Raa | Nurphoto | Getty Images
Bitcoin fell below $20,000 on Friday, hitting a nearly two-month low, after a US stock market sell-off and a crypto-focused lender collapsed.
The cryptocurrency market saw over $70 billion wiped from its value in the 24 hours as of 5:12 a.m. ET.
Bitcoin was trading down almost 8% at $19,900.28 as of 5:11 a.m., according to data from CoinDesk. AND. Ether was down more than 8% at $1,400.63.
The crypto selloff was driven by a number of factors. Cryptocurrency price movement is quite closely correlated with US stock markets, especially the tech-heavy Nasdaq. On Thursday, major US indices closed lower.
On Tuesday, US Federal Reserve Chairman Jerome Powell indicated that interest rates could rise – and stay higher – than expected. Rising interest rates over the past year have weighed on risky assets such as stocks, and in particular cryptocurrencies.
“There is little reason to buy bitcoin now, as the market is saturated with negative developments, not only specifically for the crypto industry, but also for the broader financial market,” said Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank. CNBC via email.
Another major factor weighing on crypto prices is the collapse of Silvergate Capital, one of the top lenders to the crypto industry. Silvergate announced on Wednesday that it was ceasing operations and liquidating its bank.
The fall of Silvergate is another example of how the collapse of leading cryptocurrency exchange FTX continues to impact the industry. FTX was a big Silvergate customer.
Separately, Silicon Valley Bank said late Wednesday that it had sold $21 billion of its holdings with a loss of $1.8 billion. SVB is a major bank in the field of technological start-ups. Providing traditional banking services while financing technology projects, it is considered the backbone of the venture capital industry in the United States.
The asset sale comes as SVB grapples with a weaker tech funding environment, with VCs remaining cautious amid a weaker macro backdrop and rising interest rates.
Silvergate and SVB put their money in US Treasuries which lost value when the Fed raised rates. These banks were forced to sell these bonds at a loss to shore up their capital.
“Overall, sentiment appears to have turned quite bearish given a combination of global macro and interest rate rises, but also the exposure that many banks likely have to longer-dated securities,” Vijay said. Ayyar, vice president of business development at crypto exchange Luno, told CNBC via email.