Bitcoin Declines 8% as Crypto Market Cap Falls
On Friday, the price of Bitcoin dropped below the $20,000 mark, leading to more pain for investors. The leading crypto had lost 8.3% and was trading at $19,900.
The level was last seen on January 13th. A similar pattern was seen in the case of the second-largest crypto, Ethereum, which lost 9.8% in 24 hours to reach a low of two months at $1,383.
The change
The broader crypto market saw a remarkable change in its fortunes in this week, even though it had had a good start to the year with some solid gains that had driven Bitcoin to $25,000.
The latest decline resulted in the overall market cap of the crypto space decline below the $1 trillion mark, making it a first since January 19th.
In recent weeks, there have been some serious headwinds for the industry and one of the key drivers of the decline was the meltdown of Silvergate Bank, which is now liquidating.
The Silvergate impact
Numerous crypto businesses had been using Silvergate for their banking needs and its winding down means that channeling fiat into crypto would become difficult for people.
Not only was the bank being used for channeling money into crypto projects, crypto venture capital funds, crypto hedge funds and exchanges, but was also used for settling balances throughout the day, week and even on holidays.
Therefore, market sentiment has taken a hit due to the collapse of Silvergate. There are also concerns that other banks may not want to work with crypto companies.
This would make it immensely difficult for institutional investors to deploy their capital in the crypto space, which could impact the market efficiency and liquidity.
Bearish pressure
There was also bearish pressure on the crypto industry after a 30% excise tax was announced on Tuesday by the Treasury Department on Bitcoin mining hubs.
In addition, a lawsuit was filed against the KuCoin crypto exchange by the Attorney General’s office in New York for violation of securities and commodities laws.
Investors are concerned that the new tax proposal could reduce adoption and profitability of crypto mining in the United States.
