- Bitcoin fell below $20,000 on Friday, hitting its lowest level in nearly two months after the U.S. stock market sold off.
- Another factor affecting cryptocurrency prices is the collapse of Silvergate Capital, a major lender to the crypto industry. On Wednesday, Silvergate announced that it would cease operations and liquidate its bank.
- Investors are also worried after a Silicon Valley tech bank said it sold $21 billion worth of securities for a $1.8 billion loss.
© Contributed by CNBC Bitcoin is under pressure after the Federal Reserve hinted that prices could rise more than expected and after the collapse of major crypto lender Silvergate Capital.Bitcoin briefly fell 8% below $20,000 on Friday, reaching its lowest level in almost two months after the US stock market sell-off and the collapse of the cryptocurrency-focused lender.
The cryptocurrency market lost over $70 billion in 24 hours.
Bitcoin last fell just 2.7% to $19,944.66 per coin. Ethereum last fell 2.6% to $1,414.21.
There were a number of factors behind the cryptocurrency sell-off. Cryptocurrency price movements are closely linked to US stock markets, especially the high-tech NASDAQ.
On Tuesday, Federal Reserve Chairman Jerome Powell indicated that interest rates could rise and remain higher than expected. Rate hikes over the past year have hurt risky assets such as equities and, in particular, cryptocurrencies.
“Right now, there is little reason to buy bitcoin as the market is saturated with negative events not only for the cryptocurrency industry, but also for the wider financial markets,” Yuya said. Hasegawa is an analyst at the Japanese cryptocurrency company Bitbank. CNBC via email.
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Another major factor affecting the prices of cryptocurrencies is the collapse of Silvergate Capital, one of the leading lenders in the crypto industry. On Wednesday, Silvergate announced that it would cease operations and liquidate its bank.
The fall of Silvergate is yet another example of the collapse of major cryptocurrency exchange FTX that continues to impact the industry. FTX was a major Silvergate customer.
Also on Friday morning, the Federal Deposit Insurance Corporation shut down a Silicon Valley bank and took control of its deposits, making it the biggest collapse of a US bank since the global financial crisis. The bank's parent company, SVB Financial, said late Wednesday that it had sold $21 billion of its assets for a $1.8 billion loss. SVB was a big technology startup.
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The asset sale comes as SVB faces a weaker technology funding environment and venture capital remains cautious given the deteriorating macro environment and rising interest rates.
Silvergate and SVB are investing in US Treasuries that have fallen in value due to higher interest rates by the Federal Reserve. These banks were forced to sell these bonds at a loss to maintain their capital.
Vijay Aiyar, vice president of business development at cryptocurrency exchange Luno, told CNBC via email.
- Tanaya Machel of CNBC contributed to the coverage.