- The Silvergate Capital problem has caused the market to begin to see similarities with the FTX situation although this time the size of Silvergate is much smaller and bankruptcy is not a foregone conclusion. Silvergate's market cap is now smaller than 200 mln USD;
- Bitcoin retreated overnight, near $22,300, losing $1,200 and $22 billion in market capitalization in just 20 minutes;
- Ethereum is also losing, with nearly $10 billion evaporating from its capitalization. In total, the cryptocurrency market lost nearly $50 billion overnight and is now valued at around $1.08 trillion;
- The value of all futures liquidations is oecnie more than $230 million and the price movement shows that the decline was triggered by a massive 'margin call';
Could it be FTX 2.0 event ?
Silvergate, after posting a nearly $1 billion net loss in 2022, indicated that it would not file its annual 10K report with the SEC in time and warned of possible financial problems. As a result, deposits to and from the bank were suspended by Coinbase, among others, and shares fell 57%. The investigation into the bank's relationship with FTX and Alameda Research is being conducted by the US Department of Justice. If bankruptcy occurs, we can expect increased comments from regulators although it is not yet clear to what extent the dire financial situation has not been affected by the FTX connections and the 'run' on November and December payouts - for example, in 1929 even well-capitalized banks in the US collapsed - due to the avalanche of payouts.
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Last year, the key leverage ratio - which measures a bank's equity as a share of total assets - fell for Silvergate by nearly 6% from a healthy 11% to just over 5%. This is the cutoff point, after a drop below which the FDIC, the bank failure regulator, usually comes knocking at the door. The FDIC guarantees returns of up to $250,000 but assets accumulated at Silvergate are not subject to them because the regulations do not cover cryptocurrencies. CoinDesk pointed out that banks usually collapse on Friday night allowing the FDIC to work, transferring the deposits to a new custodian and looking for buyers for the remaining assets - but this time the future remains uncertain indicating a continuation of bank runs and possible bankruptcy, the effects of which are still not fully predictable.
The vast majority of altcoins are seeing significant declines. Filecoin and DYDX are losing the most. Source: xStation5
Silvergate Capital's (SI.US) share price is currently at historic lows. Source: xStation5
Bitcoin chart, H4 interval. The declines have been temporarily halted, but the rebound is very weak and the zone in the vicinity of $20,000 to $21,500 (orange color), marked by three previous price reactions (the local peak from before the FTX bankruptcy, the attempt to climb above it from January and the local lows from mid-February) and the 38.2 Fibonacci retracement of the upward wave initiated at the beginning of November 2022, may be more important for the trend going forward. This may indicate a possible test of the next support level. Source: xStation5
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