For many, the cryptocurrency market is an enigma. For years, the digital asset class has presented many opportunities for traders and investors, with the potential for high rewards and low risk.
Unfortunately, the crypto market has also seen its share of tumultuous times, with sharp price swings, security breaches, and regulatory uncertainty. The global pandemic was the latest to cause a market-wide market cap collapse below the $1T mark.
Silvergate Capital, Kucoin, And Huobi Cases Lead The Way
The overall worth of the crypto industry dropped below the $1T milestone for the first time since January. A 9.5% reduction from the $1.01T seen on Wednesday brought the global market cap to its two-month lowest point of $914B on Friday.
This was a result of a severe sell-off caused by some worrying events. Silvergate Capital, the parent organization of Silvergate Bank, a banking institution primarily focused on cryptocurrency operations, declared on Wednesday that the bank would have to shut down and file for bankruptcy due to exposure to FTX.
This announcement followed the postponement of filing its annual 10-K with the U.S. Securities and Exchange Commission. Moreover, New York Attorney General Letitia James initiated legal action against the popular crypto exchange KuCoin.
She said the exchange has allegedly provided unregistered securities to New York residents, which is a cause for concern. The Attorney General stated that certain crypto assets, such as Ethereum (ETH) provided by KuCoin, could be considered securities.
This sparked worries as it could set a precedent for the U.S. government to label ETH and other digital currencies as unregistered securities. On Thursday, Huobi Token, the native cryptocurrency of the Huobi trading platform, saw a sharp decrease of more than 90% in an abrupt crash, creating discussion among traders.
Since the beginning of this year, Voyager, the bankrupt lender, has been continuously selling off millions of dollars worth of assets. Until now, the lending firm has disposed of assets worth $358M, despite the approval granted to Binance to acquire its assets.
Silicon Valley Bank Collapses After Bank Run
On Friday, Silicon Valley Bank (SVB), one of the U.S.’s biggest banks, experienced a bank run due to apprehensions among investors, leading to its collapse. In addition, Circle reported earlier that it has a $3.3B exposure to SVB, accounting for 8% of its total $40 billion reserves.
Consequently, Binance announced that it would discontinue the auto-swap of USDC to BUSD due to the current market situation, adding that it has no connections to SVB. Following this, Coinbase also chose to cease USDC/USD swaps temporarily.
In a recent bankruptcy filing, Circle’s crypto lending counterpart BlockFi disclosed a $227M exposure to SVB. According to Fox Business journalist Eleanor Terrett, SVB was a banking partner for a16z, a top venture capital firm.
However, a16z has not confirmed nor denied any involvement with SVB.
