Bitcoin Dips Below $21K to Reach Lowest Level In 7 Weeks as Silvergate Bank Shutdown Shakes Investors

Bitcoin BTC$89,670.83 sank below $21,000 for the first time in seven weeks as investors continued to fret about the fallout from crypto-friendly bank Silvergate Bank’s implosion.

On Wednesday Silvergate Capital (SI), the parent company of the lending focused bank, said that Silvergate Bank would “voluntarily liquidate” its assets and shutter operations.

The largest cryptocurrency by market capitalization traded as low as $20,050 on Thursday, its lowest level since Jan. 14, before regaining some ground to hover just over $20,370, off more than 7.6% over the past 24 hours.

“This remains a tough environment for crypto given the fallout from Silvergate Capital, so bitcoin could see further selling pressure test the $20,000 level,” Edward Moya, senior market analyst at foreign exchange market maker Oanda, wrote in a Thursday note.

In the past 24 hours, bitcoin posted more than $98 million in liquidations, with over 94% of them being long positions, Coinglass data shows.

Investors became concerned and bitcoin’s price started dropping when last week when Silvergate said that it had delayed filing its annual report and warned of its potential inability to continue as a “going concern.”

Moya wrote that Silvergate Bank’s shutdown underscored crypto banking’s ongoing problems. He added that “the cryptoverse now tries to find a new services company to help make payments and other deposit-related services.”

Julius de Kempenaer, senior technical analyst at StockCharts.com, noted in an email to CoinDesk that if more service suppliers to the crypto market like Silvergate fall into trouble, it will “make getting access to crypto harder and … not be very inviting for new investors.”

Stefan Rust, CEO of economic data-aggregator Truflation, wrote in an email to CoinDesk that Silvergate’s crisis will slow the rate of institutions entering the market because “they don't have an on- and off-ramp that scales as fast."

“It will also push more crypto business offshore,” Rust wrote. “Most, though, will find another on- and off-ramp that they can use to work around this.”

Elsewhere in markets

Most major cryptos were also recently in the red. Ether (ETH), the second-largest crypto in market value, was recently down over 7% from Wednesday, same time, to change hands at $1,440.

Much of ETH’s price drop coincided with Thursday afternoon's news on the New York Attorney General's office suing KuCoin, alleging the crypto exchange offered unregistered securities and commodities. The lawsuit alleges that ETH, luna and terraUSD were securities.

Layer 2 platform Polygon’s MATIC token was down over 8% over the past 24 hours and 16% in the past seven days to recently trade below $1. SOL, the token of the Solana blockchain, tumbled 9% for the day to $17.09. SOL, which had been hovering above the $20 range most of this year, has lost 20% over the past seven days.

The CoinDesk Market Index, which measures overall crypto market performance, was down 4.7% for the day and 11.4% for the week.

Equity markets also struggled, with the S&P 500 down 1.9% Thursday afternoon.

UPDATE (March 9, 2023, 21:26 UTC): Updates bitcoin and ether price information and bitcoin liquidations total and adds paragraph about New York AG lawsuit.