Bitcoin (BTC-USD) dropped more than 7.5% late Thursday to a seven week low of $20,300.
“It’s a difficult time for crypto, and Bitcoin could face further selling pressure as it tests the $20,000 level,” commented Edward Moya, a senior market analyst with Oanda.
Ether (ETH-USD) has fallen by the same amount in this period, trading at $1,439 per coin.
Crypto’s total market capitalization has fallen 6% from $1 trillion to $942 billion, according to Coinmarketcap.
Crypto investors and businesses are trying to figure out the implications of the liquidation of Silvergate Capital (SI), a key U.S. banking partner.
“It won’t be an easy transition for the industry,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, told Yahoo Finance.
Silvergate had provided a payments network that enabled customers to exchange U.S. dollars between accounts 24/7, which was essential for the crypto market. The bank suspended the service last Friday.
The other bank that was friendly to crypto firms, Signature Bank (SBNY), is also reducing its exposure to digital asset businesses. “If small banks such as Customers and Pathward (formerly MetaBank) don’t step in to fill the gap, other alternatives could include the Euro and non-dollar backed stablecoins,” said Conor Ryder, an analyst for Kaiko, on Thursday.
“It’s a setback for the ecosystem but unlikely to be a permanent one,” Acheson added.
Crypto markets were also under pressure Thursday due to financial stresses in the banking sector, such as Silicon Valley Bank, which caused shares of its parent company, SVB Financial, to plunge 60% as the S&P 500 dropped 1.8%.
On top of that, the Biden Administration is looking to raise $24 billion for the U.S. government by closing a tax loophole that allows investors to deduct crypto losses against capital gains and income.
“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, to the U.S. House Financial Services Committee on Thursday.
Coinbase, the largest crypto firm in the U.S., is not in immediate danger since it ended business with Silvergate last week. Even so, CFRA Research has kept its hold rating on Coinbase shares 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.
Coinbase stocks dropped 7.8% Thursday to $58.
The Office of the New York Attorney General is taking legal action against 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 blatantly disregarding our laws and putting investors at risk,” Attorney General Letita James said in a statement.
David Hollerith is a reporter for Yahoo Finance. Follow him on Twitter @DSHollers
Click here for the latest crypto news, updates, values, prices, and more related to Bitcoin, Ethereum, Dogecoin, DeFi and NFTs
Read the latest financial and business news from Yahoo Finance
