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FINANCING THE FUTURE

Crypto crash: Bitcoin, Ethereum, Dogecoin prices plummet after Silvergate Bank collapse

There’s a lot going with crypto and stocks right now. We’ll try to sum it up.

Crypto crash: Bitcoin, Ethereum, Dogecoin prices plummet after Silvergate Bank collapse

[Photo: Getty Images]

BY Michael Grothaus3 minute read

It’s been a bad 24 hours for traditional markets and cryptocurrencies. Yesterday, stock markets and individual stocks got hit hard. The Nasdaq fell over 2% while tech giants like Apple, Amazon, and Google were down nearly as much. Banking stocks fared even worse, with JPMorgan Chase falling over 5% and Bank of America down over 6%.

Now this morning, cryptocurrencies are crashing across the board. Bitcoin hit a two-month low after falling nearly 10% as of the time of this writing, while Ethereum was down just as much. So what’s behind it all? Here’s what you need to know:

What happened with markets and bank stocks yesterday?

The panic began on Thursday when VC investors started urging people to move their money out of Silicon Valley Bank as a result of fears surrounding the bank’s liquidity. That set off a cascade of stock selloffs on the broader stock market and sent shares of the bank’s parent company, SVB Financial Group (SIVB), down more than 60% by market close.

In premarket trading today, at the time of this writing, SIVB shares are down another 44%.

SVB is the financial partner of almost half of the VC-backed tech startups in Silicon Valley and the liquidity panic surrounding it hit other tech and bank stocks hard.

Doesn’t crypto usually rise when traditional markets take a hit?

Sometimes. But if you look at a board of crypto prices this morning, you’ll see nearly every major crypto is in the red. Bitcoin, Solana, and Ethereum are down almost 10% as of the time of this writing. Binance is down nearly 8%, Dogecoin is down over 10%.

While some of this can be blamed on yesterday’s rough stock market, the main reason for this is likely the collapse this week of Silvergate Bank. Its collapse, combined with the SVB liquidity fears, has spooked the crypto markets, too.

What happened to Silvergate Bank?

Silvergate Capital Corporation, the owner of Silvergate Bank—which billed itself as “the leading bank for innovative businesses in fintech and cryptocurrency”—announced it would be shutting down the bank.

In a press release on Wednesday, the company said, “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank’s wind down and liquidation plan includes full repayment of all deposits.”

As the CoinTelegraph notes, Silvergate Bank was a major banking partner for numerous crypto firms. Its winding down has thus spooked crypto investors.

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Was Silvergate Bank’s fall related to the FTX collapse?

Many things, including a shaky balance sheet, contributed to Silvergate Bank’s collapse. But the U.S. Justice Department is looking into Silvergate Bank’s dealings with FTX. As Bloomberg notes, “The probe touches on a key question: What did banks and intermediaries working with [FTX founder Sam] Bankman-Fried’s firms know about what US officials have called a years-long scheme to defraud investors and customers?”

However, at this time, Silvergate Bank has not been accused of any wrongdoing in relation to FTX.

How will Silvergate collapse affect crypto markets in the future?

That remains to be seen. But the crypto industry generally looks unfavorably on any increased government regulation. With collapses mounting up, more politicians may heed calls for increased regulation in the industry.

On the day Silvergate Capital Corporation announced Silvergate Bank’s winding down, Senator Elizabeth Warren of Massachusetts tweeted, “As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.”

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ABOUT THE AUTHOR

Michael Grothaus is a novelist and author. He has written for Fast Company since 2013, where he's interviewed some of the tech industry’s most prominent leaders and writes about everything from Apple and artificial intelligence to the effects of technology on individuals and society. Michael’s current tech-focused areas of interest include AI, quantum computing, and the ways tech can improve the quality of life for the elderly and individuals with disabilities More


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