Erik Weijers, 17 days ago

Bearish Friday: why are prices dropping?

Both Bitcoin, Ether and traditional bank stocks in the US dropped about 8% overnight. Both the crypto and the traditional financial sector have their issues. Let's list a few recent problems and deal with the negative news head-on, so we can focus on all the good developments later. 

Yesterday, the news broke that Silicon Valley Bank (SVB), a regional United States bank, needed to raise capital to prop up its balance sheet. Traders fear that it's not the only regional bank in trouble and bank stocks tumbled with 8% on average. The reason comes down to the fact that regional banks have a lot of unrealized losses in government bonds, which they partly use as collateral. After the sharp interest rates hikes of the past year, their bond portfolio has dropped in value (full explanation by MacroAlf here).

Macro analysts have warned for many months that things would 'break' because of the fast interest rate hikes. The fastest ever tightening financial conditions is drying up liquidity and destabilizes markets. Is this SVB crisis a first sign that the Fed has tightened too much and will have to reverse course soon?

Crypto news also not so rosy

But why did the crypto prices slip with around 8% as well? There are several things going on. 

  • First of all Silvergate, the US bank that has crypto companies as their clients, has declared bankruptcy. Large creditors started withdrawing. Even though all withdrawals seemed to have been happened in an orderly fashion, the loss of clients has proven the death knell for the bank. The bank also has been under regulatory attack from the US government, and this hasn't helped.
  • Speaking about regulators attacking crypto, it is a thing. Operation chokepoint 2.0 seems to be in full swing. The most recent news is that crypto exchange KuCoin will have to deal with a lawsuit, in the state of New York, for selling Ethereum. The State Attorney General reasons that Ethereum is a security and should have been registered by KuCoin. This lawsuit is an example of the looming threat against all crypto coins except for Bitcoin. (The SEC has always stated that Bitcoin is a commodity and doesn't have to comply with strict securities laws.)
  • Bitcoin has its own issues: the Biden administration has proposed a 30% tax on electricity used for Bitcoin mining. If it will happen (not very likely), it will hurt the huge Bitcoin mining industry in the US.


Like we said, we wanted to get the bad news out of the way. There is less money in the system (liquidity), which gets banks in trouble and depresses prices across all markets. Also, the crypto industry in the US faces headwinds, as regulators seize the post FTX-drama opportunity to marginalize the crypto industry.

But in the background, the innovation in the crypto market is advancing at full speed. Bear markets are for building!

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Regulatory arbitrage: will UK attract crypto companies from the US?

Mar 24, 2023

The United States government is tightening the screws on crypto companies. While this may be considered a worrying development, it's by no means crypto's death knell. Other countries are clearly standing in line to embrace the talent and the money that this fledgling industry provides. The United Kingdom is one such example.

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