• Bitcoin prices dropped after news of the Silvergate Bank shutdown.
• The shutdown of Silvergate Bank was one of the biggest economic disasters since the Great Recession.
• Pressure from rising interest rates and lack of confidence in cryptocurrencies has caused sentiment to turn bearish, leading many to wonder if 2023 will be just like 2022.
Silvergate Shutdown Causes Bitcoin Price Crash
In mid-March, bitcoin fell by more than eight percent and briefly went below the $20K mark due to news that Silvergate Bank – a tech-friendly financial institution stationed in Northern California’s Silicon Valley – was being shut down by regulators for numerous failures. This led to a dip below the $1 trillion mark for crypto assets, erasing any hopes of a rally earlier this year when bitcoin hit its six-month high near $25,000 per unit.
Interest Rates Rise
Jerome Powell – head of the Federal Reserve – stated that despite all the Fed’s talk that interest rates likely wouldn’t spike in 2023 as they did last year, this may have been wishful thinking. He has now reversed his stance and said that interest rates are likely to shift higher than expected and remain this way through 2023.
Yuya Hasegawa – an analyst at Japanese crypto firm Bit Bank – said there is little reason to buy bitcoin now as market sentiment is saturated with negative developments not only for crypto but also for wider financial markets as well. Vijay Ayyar – vice president of corporate development at crypto exchange Luno – commented on how overall sentiment seems bearish given a combination of global macroeconomic issues and interest rate rises, as well as exposure banks have to long duration securities.
Will 2023 Be Just Like 2022?
With these latest developments many wonder if 2023 is going to be just like 2022 which was arguably one of worst years financially speaking in recent memory due to stay-at-home orders and other effects caused by COVID-19 pandemic restrictions.
The collapse of Silvergate Bank has put significant pressure on cryptocurrency markets, while rising interest rates across the globe adds further concerns about investor confidence and future market performance throughout 2023. It remains unclear whether or not cryptos will recover or if we are doomed for another bleak year similar to what we experienced in 2020/2022