While cryptocurrencies are no stranger to sudden market movements and volatility, the latest market shake-up has left many in the industry reeling.
A large red bar appeared on trading charts of major cryptocurrencies on Friday, with their values plummeting by hundreds of millions of dollars within hours.
In the last week, Bitcoin‘s BTC/USD price dropped by 4.8%, while Ethereum ETH/USD saw a decline of 3.9%.
Altcoins also had a poor performance in the last week, with Cardano ADA/USD and Solana SOL/USD dropping by 6.3% and 8.3%, respectively. Shiba Inu SHIB/USD and Dogecoin DOGE/USD, two popular memecoins, also suffered losses, falling by 9.9% and 5.5%, respectively.
Here are the major reasons behind this latest market downturn:
Uncertainty Around Silvergate Bank: One of the key reasons behind the sudden drop in cryptocurrency prices was the uncertainty surrounding Silvergate Bank SI, a California-based crypto-bank that plays a vital role in providing market liquidity.
Shares of Silvergate Bank fell by a staggering 58% during trading in the U.S. on Thursday and continued their downward spiral on Friday.
The bank allows cryptocurrency exchanges and other customers to exchange cryptocurrency for fiat money, and its fall has sparked concerns over the stability of the cryptocurrency market.
Coinbase Dumps Silvergate: Another factor contributing to the market downturn was Coinbase‘s COIN decision to suspend payments to Silvergate.
Coinbase, one of the largest cryptocurrency exchanges in the world, cited “technical issues” as the reason behind the suspension.
Still, the move has fueled concerns over the safety and security of cryptocurrency exchanges.
Gemini, Crypto.com, Bitstamp, and MicroStrategy MSTR wash hands off Silvergate: On March 2, multiple cryptocurrency companies announced temporary halts on accepting deposits made via Silvergate Bank.
This further exacerbated concerns over the bank’s stability and the safety of cryptocurrency exchanges.
SEC Chair Gensler Says Crypto Exchanges May Not Be Qualified Custodians: At a recent Investor Advisory Committee meeting, SEC Chair Gary Gensler expressed skepticism about the idea of crypto exchanges serving as qualified custodians for investment advisers.
He acknowledged that a proposed rule directing advisers to use qualified custodians for asset storage, including cryptocurrencies, would improve existing protections.
This has once again raised questions about the regulation and oversight of cryptocurrency exchanges and has contributed to the market’s instability.
Wallets linked To FTX.com And FTX.US Exchanges Facing A Significant $2.2 billion Asset Shortfall: The news that FTX Trading Ltd. FTT/USD and its affiliated debtors have reported significant shortfalls in fiat bank accounts and digital asset wallets associated with the FTX.com and FTX.US exchanges, totaling $2.2 billion.
The company shared a presentation with the Official Committee of Unsecured Creditors and announced that it will be filed on the docket in the Chapter 11 cases.
This has added to the overall sense of instability and uncertainty in the market.