Yahoo Finance Bitcoin tumbles to 8-week low as bank liquidation, regulatory pressures weigh on crypto
Bitcoin (BTC-USD) fell more than 9% Friday morning to $19,700, a eight-week low. The largest cryptocurrency lost more than $52 billion in market capitalization value since Tuesday.
Ahead of the release of the U.S jobs report for February and after earlier events such as the liquidation of Silvergate Capital and continued regulatory pressures on the industry, “this remains a tough environment for crypto," Edward Moya, a senior market analyst with Oanda said.
Ether (ETH-USD) is down by 10% for the same 24-hour period, it is also changing hands at an eight-week low, tumbling below $1,400 per coin.
Crypto’s total market capitalization fell more than 8% through Friday morning from $994 trillion to $914 billion as measured by Coinmarketcap.
Crypto investors and businesses are grappling with what the liquidation of Silvergate Capital (SI), a crucial U.S. banking partner, could mean for the crypto asset class’ access to dollars.
"It won’t be a smooth transition for the industry at all," Noelle Acheson, author of the Crypto Is Macro Now newsletter, told Yahoo Finance.
Silvergate offered a payments network that allowed customers to exchange U.S. dollars between accounts 24/7 to match the liquidity needs of the crypto market. The bank suspended the offering last Friday.
The other most amenable bank to crypto firms, Signature Bank (SBNY), is also actively reducing its exposure to digital asset business. "If small banks such as Customers and Pathward (formerly MetaBank) don’t step in to fill the gap, other alternatives include the Euro and non-dollar backed stablecoins, Conor Ryder," an analyst for Kaiko said Thursday.
"It's a blow to the ecosystem but its unlikely to be a permanent one," Acheson added.
Crypto markets were also under pressure Thursday as broader financial stresses in the banking sector emerged amid new challenges as Silicon Valley Bank, news which sent shares of its parent company SVB Financial down 60% on Thursday as the benchmark S&P 500 fell some 1.8%.
Elsewhere, the Biden Administration is proposing to raise $24 billion for the U.S. government by closing a tax loophole. The loophole allows investors to harvest their crypto losses to offset capital gains and income for individuals.
"As other countries are bringing crypto safely into the regulatory perimeter, we should be doing the same," said Paul Grewal, Coinbase's chief legal officer, before a U.S. House Financial Services Committee Thursday afternoon.
Largest among U.S. crypto firms, Coinbase (COIN) has several banking partners and is not as immediate a risk from Silvergate’s liquidation as smaller startups given the exchange ended business with the firm last week.
Even so, CFRA Research has chosen to maintain its hold rating on shares of Coinbase at neutral.
"Although COIN has more measured exposure directly to SI, indirect impacts around the health of like-kind clients and/or general investor enthusiasm (i.e., trading activity) could also create an overhang on COIN's fundamentals," CFRA analyst David Holt said in a Thursday note.
Shares of Coinbase fell 7.8% Thursday to $58. They traded more than 1% lower during Friday's pre-market session.
The Office of the New York Attorney General is also suing KuCoin, the fourth largest crypto exchange by trading volume for failing to register as a securities and commodities broker-dealer
"My office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” Attorney General Letita James said in the release.
Price have been updated to reflect Friday morning prices ahead of the U.S. February Jobs report.
David Hollerith is a reporter for Yahoo Finance. Follow him on Twitter @DSHollers
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