In its latest Insights report, blockchain analytics firm Santiment claimed that the collapse of Silvergate Bank shares caused the recent drop in the price of bitcoin (BTC).
This article delves into the reasons for this crash and the impact it had on the cryptocurrency market.
Overview of the Bitcoin (BTC) Crash
BTC was able to surpass $25,000 for the first time in eight months. However, the flagship cryptocurrency has been fluctuating since then, falling to $21,000 in the following weeks. On March 3, BTC experienced a sudden drop from $23,435 to $22,259 in a single hour.
📉 #Bitcoin's price drop a couple days ago, likely attributed to the #Silvergate share collapse, has had a tough time rebounding back. Our latest community insight discusses a potential $BTC support level to watch, and what could be in store for #altcoins. https://t.co/HMgIIuc5AD pic.twitter.com/i22qLhCLbV
— Santiment (@santimentfeed) March 6, 2023
Santiment’s analysts forecast that the bitcoin price will continue to fall in the coming weeks, and set a downside target for the crypto asset at $19,500, given the current financial and crypto market landscape in the wake of the bank’s meltdown. This price would be reached if bitcoin fails to stay above $22,300.
The Role of Silvergate Bank in the BTC Crash
Santiment’s report stated that the share price of the crypto space’s most influential banking partner, Silvergate Bank, plummeted 60% on concerns related to the company’s sustainability over the next 12 months.
As a result, crypto companies terminated their relationship with the financial institution.
The pressure that Silvergate Bank is receiving from the market, along with the current position of the cryptocurrency industry, leads Santiment’s analysts to conclude that traders and investors should prepare for a sharp drop in the price of BTC in the coming weeks.
What Happened to Silvergate?
On March 2, Silvergate Bank, one of the world’s leading banks offering cryptocurrency services, declared to the U.S. Securities and Exchange Commission (SEC) that it is facing liquidity problems.
According to the SEC statement, the firm requested an extension to file its annual report of operations, as they “expect to record even greater losses.”
In addition, they indicated that they have been selling a large part of their assets to pay outstanding debts to the Federal Home Loan Bank of San Francisco, which total US$4.3 billion.
Impact on the Cryptocurrency Market
Following the news of Silvergate, the cryptocurrency market lost 5.57% of its market capitalization, falling from $1.033 trillion to $975 billion. Santiment’s report warns that the market could experience further drops if BTC fails to stay above $22,300.
The crash also impacted other cryptocurrencies, with Ethereum, XRP, and Litecoin all experiencing significant drops.
However, some analysts argue that the current dip in the market is a healthy correction, necessary for the long-term growth and stability of the cryptocurrency industry.
Conclusion
The crash of the cryptocurrency market caused by the collapse of Silvergate Bank shares highlights the importance of monitoring the underlying financial infrastructure that supports the cryptocurrency industry.
Traders and investors should remain vigilant, keep track of the latest developments, and prepare for potential sharp drops in the future.
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