Silvergate goes bankrupt? Panic in the cryptocurrency market and the highest level of liquidation since August
Bankruptcies continue in the digital currency sector. A popular cryptocurrency bank has joined the group of companies that are closing down.
Thursday's reports of Silvergate's poor financial situation were met with a lightning reaction from investors. The cryptocurrency bank said that it cannot guarantee that it will be able to continue its operations. As a result of this information, the company's shares fell by as much as 50% during that day. The Bitcoin rate also reacted to this event with declines, and its price reached an unprecedented level of liquidation of long positions.
The cryptocurrency sector reacts to reports from Silvergate
On Thursday, cryptocurrency-friendly bank Silvergate said it had been struggling with a bad streak for some time. After the company reported a net loss of $1 billion for Q4 2022, the institution is now examining its position in terms of continuing operations. The company's representatives also sent a letter to the US Securities and Exchange Commission (SEC) stating that the bank would not be able to prepare its financial report for last year on time.
As a result of this unfavorable news, the Bitcoin price has lost more than 4% since yesterday. At the time of writing this article, the oldest cryptocurrency is valued at around $22,350.
What's more, as we learn from data from the Glassnode service, cryptocurrency exchanges since Thursday recorded the liquidation of Bitcoin long positions worth more than $ 62 million. This is the highest level since August 2022.
The increase in liquidation of long positions implies that traders were leveraged by betting on an uptrend. It seems that before the announcement of the disturbing information by Silvergate, investors took a bullish attitude towards the BTC price rally.
Silvergate's situation is getting worse
Silvergate bank shares lost 50% of their value on Thursday. The drop in their prices comes after the company shared its concerns about its "ability to perform operations". Moreover, the SEC was notified by representatives of this company about the delay in the filing of the annual report by the bank.
This is not the end of bad news about this institution. Most cryptocurrency exchanges announced yesterday that they are suspending cooperation with Silvergate due to the current situation.
Given that this bank is an active intermediary in asset transfers between exchanges and other market participants, Silvergate's financial situation is the direct cause of the fall in Bitcoin's quotations.