(Bloomberg) – Bitcoin fell to its lowest level in about two weeks, part of a broader pullback in crypto markets as investors digested the unwinding of a key industry payments network.
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The largest token fell as much as 6% before moderating part of the price slide to trade down 4.4% at $22,380 in London as of 8:30 a.m. Friday. Smaller coins like Ether, Avalanche, and meme token Dogecoin also suffered declines.
The digital asset industry is absorbing the fallout from troubles at crypto-friendly US bank Silvergate Capital Corp., which has said it is evaluating whether it can remain profitable. The bank offers a widespread payment network that facilitates the real-time transfer of funds between crypto companies. But many digital asset exchanges, stablecoin issuers, and trading desks no longer accept or initiate payments through Silvergate.
“Silvergate is one of the top dollar bankers for the crypto industry,” said John Toro, head of trading at digital asset exchange Independent Reserve. “Any liquidity concerns directly impact market conditions and may affect the access and availability of some client funds.”
Silvergate’s troubles are the latest example of the contagion caused by crypto exchange FTX’s collapse in November. The bank suffered a rush for deposits last year in the wake of the bankruptcy of FTX, a key customer.
The digital asset sector is also grappling with broader regulatory crackdowns in the US, as well as expectations that interest rates will stay high longer to fight inflation, which is weighing on risk appetite.
Bitcoin’s fall brought some key technical levels into focus. The token has fallen below its 50-day moving average, raising the risk of further declines for some chart analysts.
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Crypto investors often turn a part of their gaze to Tether, the largest stablecoin, during times of market stress. The token is said to have a constant value of $1 and is widely used to facilitate trading in digital assets, but has long faced questions about the composition of the reserves that underpin its peg.
The stablecoin has no connection whatsoever with Silvergate, Paolo Ardoino, chief technology officer at Tether, said on Twitter.
Hayden Hughes, co-founder of social trading platform Alpha Impact, said he saw “strong buying” of Tether over a five-minute period during Friday morning’s trading session in Asia. “We saw a strong defense,” Hughes said, adding that it “probably came from a market maker.”
Bitcoin’s recovery in 2023 has cooled to 35%, still well above the 4% return for global equities. Crypto markets witnessed a $1.5 trillion collapse over the past year amid tighter monetary policy and a series of explosions that revealed high counterparty risk.
–Assisted by Akshay Chinchalkar, Sidhartha Shukla and Suvashree Ghosh.
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