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In mid-March, the world’s leading digital currency (bitcoin) fell by more than eight percent and briefly went below the $20K mark. The dip occurred after news got out that Silvergate Bank – a tech-friendly financial institution stationed in Northern California’s Silicon Valley – was being shut down by regulators for numerous failures.
Bitcoin Fell Following Bad News of Silvergate Bank
Many have called the shutdown of the bank one of the biggest monetary collapses since the Great Recession. With the closing of Silvergate, the crypto space again briefly fell below the $1 trillion mark, which it surpassed earlier in the year when assets like bitcoin and many other mainstream digital currencies appeared to be on the verge of a serious rally. BTC, for example, hit a six-month high of about $25,000 per unit in mid-February, giving many traders hope that the bearish market conditions of 2022 were finally over and done with.
Sadly, that positivity has disappeared in recent weeks, and Silvergate is not the only thing to blame. While the collapse of the bank has led to serious hurdles for the crypto space during these past two months, the economy has also taken a very unexpected (and gloomy) turn as not long ago, Jerome Powell – the head of the Federal Reserve – stated that despite all the Fed’s talk that interest rates likely wouldn’t spike in 2023 the way they did last year, this may have been wishful thinking.
He’s now reversed his stance and said that interest rates are likely to shift higher than expected, and that things will remain this way for the rest of 2023. Yuya Hasegawa – an analyst at the Japanese crypto firm Bit Bank – explained in a recent discussion:
There is just little reason to buy bitcoin now as the market is saturated with negative developments, not just specifically for the crypto industry, but also for the wider financial market as well.
Vijay Ayyar – vice president of corporate development at crypto exchange Luno – also threw his two cents into the mix, claiming:
Overall, sentiment seems to have turned quite bearish given a combination of global macro and interest rate rises, but also the exposure many banks probably have to long duration securities.
Could 2023 Be 2022 All Over Again?
With these latest developments, many wonder if 2023 is now in line to just be a dismal and meandering continuation of 2022, which was arguably the worst year for crypto on record. During that time, bitcoin fell by more than 70 percent, dropping from its all-time high of about $68,000 per unit (which it achieved in November of 2021) all the way down to the mid-$16K range.
Many other assets chose to follow in its footsteps, which caused the crypto industry to lose more than $2 trillion in overall valuation. It was a very sad and ugly sight to observe.