Just a week ago, everyone in the cryptocurrency market expected that the “crypto winter” was over and that we were moving towards the spring of 2023, with a positive outlook for an upward trend.
The situation quickly changed in one day as Silvergate announced its liquidation and four major banks of the U.S. lost more than $52.3 billion in market value.
Domino effect in action
After the rising trend in January 2023, Bitcoin (BTC) price moved back to the $20,000 level in just one week in March 2023. BTC lost over 10% of its value and saw a new massive price drop in 2022.
Experts blame the problem with Silvergate as the main reason. Until yesterday, Silvergate was a California bank that has been operating since 1988 and providing services to cryptocurrency users since 2016.
The domino effect began in November 2022 with the bankruptcy of FTX. Since then, Silvergate faced massive problems as its customers – mainly cryptocurrency startups – started withdrawing their funds. This led to a record liquidation of long positions in BTC futures in more than half a year. Slowly but inevitably, this led to the liquidation of Silvergate Bank.
A regulatory filing by the bank states:
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward.”
Another bubble burst
According to the Financial Times report, Silvergate and Silicon Valley Banks problems have caused another massive financial loss. The four largest U.S. banks – JPMorgan Chase, Bank of America, Citigroup and Wells Fargo – lost more than $52.3 billion in market value in a single day. Their stock prices plunged between 4% and 6% as investors began selling shares out of concern for their bond portfolios.
Bitcoin price reacts
Last week, the BTC price broke through the support level, which was stated at $21,376 last week. After that, it moved towards $20,400. Today, the support level is shifting to another minimum level of around $18,200.
Source: https://coinidol.com/greed-banking-system/