In February, bitcoin rallied more than 50%, reaching $25,000. Why has the price suddenly slumped down to $19,800?
The price of bitcoin has reached its lowest price since mid-January, sitting at roughly $19,880 (March 10, CoinGecko). The slump marks a return to one of the lowest prices of the year, diluting hopes of a fresh bull run.
So why has bitcoin tumbled this week?
Bitcoin is down 7.5% from yesterday and 15.3% from seven days. The dip comes amidst news that Silvergate – a ‘crypto-friendly’ bank – announced that it would “wind down operations” and “voluntarily liquidate” in light of recent regulation developments. The announcement stated that its liquidation plan includes “full repayment” of all deposits.
Silvergate began serving crypto clients in 2013 and boasted 750 crypto clients by 2019. On March 2, the bank lost five major partners including Coinbase, Paxos, Gemini, BitStamp and GalaxyDigital. The bank, which is 30 years old, is the latest colossal industry blow in the FTX fallout.
The collapse is also one of the first casualties to stem from President Biden’s crack down on the crypto industry, which includes a 30% tax on crypto mining energy costs. The tax would also apply to those who acquire green off-grid energy.
In addition, investors appear to have been spooked by the U.S. government recovering $1B in bitcoin from Silk Road, as blockchain security firm PeckShield shared on Twitter:
Conor Ryder, a researcher at crypto markets analysis firm Kaiko, told Coindesk that “the movement of Silk Road bitcoin to Coinbase is almost definitely being done with the intention to sell [the recovered tokens], so one has to wonder if bitcoin is due for some short-term headwinds.”
The price of Bitcoin dipped 2% within a few hours after PeckSheild’s finding, suggesting fears that selling pressures would negatively impact the price of bitcoin.