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Home Cryptocurrency

Why did Bitcoin and Ethereum drop 5%

Robbie Baskins by Robbie Baskins
March 9, 2023
in Cryptocurrency
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After waiting months for Bitcoin to rally above $25,000, the token took less than 5 hours to fall beneath the weight of Silvergate troubles. Unfortunately, the leading crypto wasn’t alone in this overnight drop. Ethereum, the second-most popular token, also had its wings clipped.

Bitcoin and Ethereum dropped by 5% to $22,300 and $1,567, their lowest points in 16 days, in the early hours of Friday. The 5% drop wiped about $22 billion off Bitcoin’s total market cap, leaving it at $431 billion. Similarly, $9 billion got wiped from Ethereum.

The upward rallies before this fall made the industry optimistic that the end of the winter was finally in sight. However, when trades began fully that morning, both prices recovered slightly but failed to return to their previous price marks. 

Bitcoin investors were particularly disappointed by this unexpected price fall because it might take longer for BTC to cross the $30,000 mark. Recall that the token has yet to attain this price since May 2022.

What’s to Blame?

Why Did Bitcoin and Ethereum Drop 5%?

Short answer, Silvergate Capital.

Silvergate played a significant role in Friday’s widespread cryptocurrency declines. The drops came as a result of the company’s financial loss announcements. 

Last Tuesday, Silvergate disclosed a $1 billion loss. Soon after this announcement, several major exchanges like Coinbase and Paxos revealed that all payments to and from Silvergate were indefinitely paused.

Since then, Silvergate has lost over 60% of its stock price. More exchanges continue to distance themselves from it.

In a discussion with Fortune about the market consequences of Silvergate’s unexpected announcement, Dexterity Capital’s managing partner, Michael Safai, noted that the ripple effect on the market should be temporary.

He insinuated that some traders forced the market to decline when they made hasty trades to avoid losses during the opening hours of East Asia’s trading time. Finally, he absolved U.S. traders of all faults because they knew about Silvergate’s news since Tuesday. 

Markus Thielen, Matrixport research lead, also concurred that the price decline is due to the recent controversy surrounding Silvergate Bank’s delayed 10-K financial report filing. He also mentioned that we could blame the increased effort by U.S. regulators to limit relationships between banks and cryptocurrency firms. 

Many crypto investors worry that U.S. regulators are attempting to sever additional banking connections between cryptocurrency firms and FDIC-insured banks.

Comparing Silvergate with FTX

Unlike FTX, Silvergate provides considerably lower liquidity for the crypto industry. FTX collapse triggered a sharp decrease in Bitcoin price on its own.

Safari corroborated that Silvergate’s direct influence on market liquidity is relatively minimal, at most, and any impact would be psychological rather than financial.

The crypto market has been hit by several failures over the past year, including the frostbite of Crypto Winter and the collapses of crypto hedge funds, Three Arrows Capital, and FTX. So it won’t be out of place to note that the fragile cryptocurrency market might still be significantly impacted by the psychological impacts of Silvergate’s downfall.

What is Ahead for BTC and ETH Prices?

What is Ahead for BTC and ETH Prices?

It may be too soon to tell if cryptocurrencies are back in the woods. Still, Bitcoin and Ethereum continue to suffer losses and display bearish signs. Other cryptocurrencies are also suffering.

Buying, trading, and selling cryptocurrencies require crypto wallets. In addition to storing crypto securely, traders also need them to protect and validate transaction information. If you looking for the best crypto wallets in Australia, click here.

After the price dropped, Bitbank cryptocurrency expert Yuya Hasegawa wrote that if Bitcoin cannot maintain the $22,000 range, there may be little chance of a rebound soon. He predicted that $21,400 would be BTC’s next stop if it continues this steep decline.

Several important economic events are happening soon; experts advise that investors keep watch. These events include Canada’s employment change and unemployment rate and the United State’s non-farm employment change.

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Robbie Baskins

Robbie Baskins

Robbie is a hardcore gamer, traveler and a bookworm. His weekends are filled with action-packed shows, books, and long sessions of Fortnite with his friends. On weekdays his alter ego takes over and he becomes a tech-savvy exquisitely sharing his knowledge of tech trends and the latest gadgets.

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