As the Silvergate crisis spreads across the market, investors have been propping up stablecoins with USDT and USDC, which has seen a surge in trading activity.
Four months after the collapse of crypto exchange FTX, another crisis-like situation has gripped the crypto market with fear and unease amid events surrounding Silvergate Capital (NYSE:SI). Earlier today, the broader cryptocurrency market destroyed over 4.5% eroding over $60 billion of investor wealth.
In the last 24 hours, the world’s largest cryptocurrency, Bitcoin, is down 4.54% and is trading at the $22,358 level with a market capitalization of $431 billion. With today’s price correction, Bitcoin has hit a new two-week low.
Along with Bitcoin, altcoins also began to bleed on a somewhat similar magnitude. Bitcoin’s competitor Ethereum (ETH) has corrected 4.76% and is currently trading at a price of $1,565 and a market capitalization of $191 billion.
Similarly, other altcoins have plunged 5-10% in this recent market correction triggered by the Silvergate Bank news. A day earlier, the cryptocurrency-focused bank announced that it would delay its filing with the US SEC as it faces a crisis of confidence in the market.
Silvergate Bank said they were experiencing significant operational challenges after the FTX collapse. The bank has faced heavy withdrawals from its crypto clients in recent months. As a result, the bank has been selling securities in large quantities to meet these obligations.
On Thursday, March 2, Silvergate Capital’s (NYSE:SI) stock price plunged 57% with JPMorgan downgrading it to “underweight” from “neutral.” Many in the crypto space are skeptical about the future of the bank and are worried about its survival.
Some crypto partners like Coinbase have also left Silvergate Bank, moving their work to rival Signature Bank.
Crypto Investors Boost Stablecoin Reserves Amid Silvergate Crisis
As the cryptocurrency market faces jitters around the Silvergate news, investors are bolstering their stablecoin holdings. During the early morning hours of Friday, the two most popular stablecoins, USDT and USDC, saw their activity pick up.
According to CoinGecko price data, the 24-hour trading volume for USDT at the beginning of March 3 was $43.2 billion, up from $39.9 billion the day before. Similarly, USDC volumes also increased to $4 billion from $3.4 billion previously.
Markus Thielen, Head of Research at Matrixport said Bloomberg:
“We have seen an increase in stablecoin activity as a sign that crypto companies are using crypto rails to move money around.”
CryptoQuant data shows that stablecoin reserves on exchanges have also increased. Previously, on March 3, the stablecoin reserves increased by 120 million tokens.
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Bhushan is a FinTech enthusiast and has a good knack for understanding financial markets. His interest in economics and finance draws his attention to the new emerging markets of Blockchain technology and cryptocurrencies. He is continuously in a learning process and stays motivated by sharing the knowledge he has acquired. In his spare time, he reads thrillers and sometimes explores his culinary skills.
