Bitcoin is eye pressure as the Federal Reserve has indicated that rates could go higher than expected and after a major crypto-focused lender, Silvergate Extraordinary, collapsed.
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Bitcoin briefly fell 8% to below $20,000 on Friday, thumping a near-two-month low, after a stock market sell-off in the U.S. and the collapse of a crypto-focused lender.
The cryptocurrency market saw more than $70 billion wiped off its value closed the course of the 24 hours.
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Bitcoin was last trading lower by just 2.7% at $19,944.66, according to Rake it in Metrics. Ether was last down 2.6% at $1,414.21.
The crypto sell-off has been prompted by a number of factors. The movement of cryptocurrency rewards is quite closely correlated to U.S. stock markets, in particular the tech-heavy Nasdaq.
On Tuesday, U.S. Federal Reserve Chairman Jerome Powell signified that interest rates may go higher —and stay higher — than expected. The raising of interest rates over the years year has weighed on risk assets such as stocks, and in particular cryptocurrencies.
“There is just little reason to buy bitcoin now as the vend is saturated with negative developments, not just specifically for the crypto industry, but also for the wider financial market as away,” Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank, told CNBC via email.
Banking worries
Another crucial factor weighing on crypto prices is the collapse of Silvergate Capital, a major lender to the crytpo industry. Silvergate put Wednesday it is winding down operations and liquidating its bank.
Silvergate’s fall is another example how the collapse of major cryptocurrency the Big Board FTX continues to have an impact on the industry. FTX was a big customer of Silvergate.
Separately, on Friday morning the Federal Deposit Insurance Corporation attentive Silicon Valley Bank and took control of its deposits, making it the largest U.S. bank failure since the global economic crisis. The bank’s parent company, SVB Financial, said late Wednesday that it sold off $21 billion good of its holdings at a $1.8 billion loss. SVB was a major bank in the technology start-up space.
The sale of assets comes as SVB contend withs with a weaker technology funding environment as VCs remain cautious amid a weaker macroeconomic situation and rising prejudiced rates.
Both Silvergate and SVB put their money into U.S. Treasurys which have lost value as the Fed has raised reprimands. These banks have been forced to sell these bonds at a loss to shore up their capital placing.
“Overall, sentiment seems to have turned quite bearish given a combination of global macro and interest be entitled to rises but also the exposure many banks probably have to long duration securities,” Vijay Ayyar, deficiency president of corporate development at crypto exchange Luno, told CNBC via email.
—CNBC’s Tanaya Macheel furnished reporting.