More than $70B is wiped off crypto market in 24 hours

Bitcoin dropped by 8% briefly on Friday. It fell below $20,000, close to a two-month low. This was due to turmoil following the collapse of Silvergate Bank earlier in the week.

According to CNBC, the volatility has wiped out more than $70 trillion from the total value of the cryptocurrency market within 24 hours.

Silvergate, a major banking partner for crypto-businesses, announced Wednesday plans to liquidate voluntarily, as the effects of FTX last year’s implosion continue to echo through the industry.

After the sudden bankruptcy last year of FTX, investors rushed to withdraw $8 billion in deposits from California-based companies.

A stunning twist of events saw the Silvergate collapse eclipsed by Silicon Valley Bank’s failure. Federal regulators seized the bank on Friday following a similar deposit run.

Silicon Valley Bank was larger than Silvergate with $175.4 billion in total deposits and $207 billion of assets, as opposed to Silvergate’s $3.8 million in deposits at last year.

SVB’s collapse also had implications for crypto markets, since its client base of tech startups also included those working in the crypto industry.

Silvergate, a California-based bank that is favored by the crypto industry, suffered a terrible outcome. This is a clear example of ‘s fallout from the collapse of FTX.

Silvergate stated in a statement that the bank’s decision to close its doors was the best way forward given recent industry and regulatory developments.

The bank also stated that the bank’s liquidation and wind-down plan included full repayment of deposits.

Analysts and investors said that the market impact of Silvergate’s closure – which was widely anticipated and seen as an important link between crypto and traditional finance worlds – was not as significant as they had hoped.

Silvergate was split last week by multiple partners, including the major crypto exchange Coinbase Global Inc.

Binance was among those who said that they didn’t have any assets lost at Silvergate.

James Butterfill, Head of Research at digital asset manager CoinShares, stated that while investors in bitcoin have taken some time to process the news and are now more focused on macroeconomic developments.

“With increasing doubts in the bond market about the potential damage further interest rate increases will cause to the U.S. Economy, it is supporting Bitcoin prices to some degree, despite the negative news on Silvergate.”

Even with the week’s slump, bitcoin still managed to gain more than 20% this year. This is in spite of the fact that it has recouped some losses of nearly 65% in 2022, which were caused by a series of high-profile corporate failures.

Most notable was the bankruptcy of FTX. It filed for bankruptcy in November following a run on deposits that exposed serious liquidity problems at the crypto exchange. The second-largest in the world, FTX had been one of the most important.

Sam Bankman-Fried, co-founder of FTX, pleaded not guilty in fraud and conspiracy after prosecutors claimed he siphoned billions from client deposits to support his hedge fund, purchase lavish Bahamas real property, and make large political donations.

Three of Bankman Fried’s top lieutenants pleaded guilty and have agreed to cooperate in the investigation. His trial is scheduled for October.