After failing at the resistance around $25,000, Bitcoin (BTC) ends up falling back heavily today. What are the reasons for this sudden drop? We’re looking at it together.
Bitcoin (BTC) corrects sharply
After a phenomenal January and a consolidating February, the cryptocurrency market is starting March in the red. The price of Bitcoin (BTC) has plummeted 4.7% since the start of the day on March 3 and is trading for $22,300 at the time of writing.
The fall was relatively sharp, occurring at 2am and taking less than an hour to complete. The price of the market’s main digital asset is now at its lowest local level since 14 February. The capitalisation of the entire market is down 3.8%, or about $45 billion.
BTC/USD price trend in 1H
From a macro-economic perspective, indicators are rather pessimistic for risky assets and more importantly the crypto-currency market. Between the probability of a growing recession in the next 12 months and inflation figures that are struggling to come down, as Vincent Ganne mentions in his analysis of the day, Bitcoin was doing quite well until now.
Such a correction was expected by many analysts and investors, explaining the profit taking in February. However, it would seem that an aggregate of news items has precipitated the crypto market’s downfall.
Silvergate, FTX, an explosive cocktail
For many, the main reason for this fall comes from Silvergate. This banking institution, partner of many important players in the cryptocurrency industry, recently announced that it was going through complicated times.
Already in a tense situation, Silvergate revealed that it would not be able to provide its Form 10-K to the Securities and Exchange Comission (SEC) by the deadline. Note that this document provides information on the financial health of the entity.
Chronology of the last 24 hours:
1. Coinbase suspends payments via Silvergate
2. Crypto․com suspends payments via Silvergate
3. FTX confirms 8.9 billion in missing funds
4. Total market cap of cryptocurrencies loses over 50 billion pic.twitter.com/h304KH1qqv
– Giancarlo Cecco (@GiancarloCecco) March 3, 2023
In the space of just one day, shares of Silvergate Capital (SI), Silvergate’s parent company, fell by almost 60%. In the aftermath, Crypto.com, Coinbase and other partners suspended their collaboration with Silvergate. It was this announcement that certainly precipitated the fall of Bitcoin.
Silvergate’s refusal to disclose its Form 10-K confirms the rumours that were circulating about its solvency and its involvement in the FTX affair. This poses a direct threat to the major cryptocurrency exchange platforms that were collaborating with the banking institution.
At the same time, the new CEO of FTX announced that he had completed a review of the accounts. Of the more than $11 billion belonging to customers, about $8.9 billion has completely disappeared. A hole in the coffers that despairs investors still dreaming of a refund from the exchange.
