Bitcoin, the leading cryptocurrency by market value, suffered a steep drop on Friday, falling over 5% to $22,000, reaching the lowest level since February 14. This sudden slide was triggered by concerns over Silvergate (SI), a crypto-friendly bank that facilitates fund transfers between exchanges and other market participants.
Shares in Silvergate had fallen 50% on Thursday after the lender said it was evaluating “its ability to continue as a going concern” and delayed filing its annual report with the Securities and Exchange Commission.
As a result, most exchanges on Thursday announced a suspension of business tied with Silvergate. Bitcoin’s late reaction to Silverage news perhaps stemmed from fears that the crisis at the bank may worsen the liquidity crunch in the crypto market. It was a tough day for Bitcoin holders as exchanges liquidated longs or bullish bitcoin futures worth over $62 million during the Asian hours, the highest amount since August. Short liquidations worth just over $500,000 were also observed.
The dominance of long liquidations shows the leverage was skewed on the bullish side, meaning most traders were positioned for a price rally. This event shows that Bitcoin’s long-term holders are becoming increasingly concerned about the direction of the cryptocurrency, and many are choosing to sell. According to data from Glassnode, the number of Bitcoin whales, defined as accounts holding at least 1,000 BTC, has decreased by 9.6% since the beginning of the year, from 2,281 to 2,063.
The number of wallets holding at least 10 BTC has also fallen significantly, from a high of 311,000 in February to around 295,000 currently. This trend indicates that large holders are becoming less optimistic about the future of Bitcoin, and they may be taking profits before prices fall further.
Despite the recent drop, Bitcoin is still up over 33% since the start of the year, and many analysts remain bullish on its long-term prospects. However, the recent sell-off has highlighted the need for caution in the cryptocurrency markets, as prices can be extremely volatile and subject to sudden swings based on news and events.
The recent events surrounding Silvergate have also highlighted the need for greater regulatory oversight in the cryptocurrency sector. While Bitcoin and other cryptocurrencies offer many benefits, including decentralization and anonymity, they also pose significant risks to investors and the broader financial system. As such, it is essential for regulators to take steps to ensure that the cryptocurrency markets are transparent, fair, and safe for all participants.