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Along with the Silvergate contagion, the negative sentiment on Wall Street has contributed further to a steep correction in the crypto market.
Bitcoin and the broader cryptocurrency market have entered a severe correction losing more than $70 billion of investors’ wealth in the last 24 hours. The world’s largest cryptocurrency Bitcoin (BTC) saw a dip under $20,000 for the first time since January.
Currently, BTC is trading 8.3% down at a price of $19,948 and a market cap of $385 billion. The crypto market is currently facing a double whammy. The announcement by Silvergate Bank (NYSE: SI) to shut down its operations has led to major selling pressure in the crypto space.
As per data on Coinglass, Bitcoin (BTC) has witnessed heavy liquidations of more than $120 million over the last 24 hours. Bitcoin has currently seen its worst week since November. The broader crypto market has come under selling pressure ever since Silvergate Capital delayed the filing of its annual report.
In a note to investors, Edward Moya, senior market analyst at foreign exchange market maker Oanda, said:
“This remains a tough environment for crypto given the fallout from Silvergate Capital. The cryptoverse now tries to find a new services company to help make payments and other deposit-related services.”
The crisis at Silvergate Bank gives US lawmakers and regulators another reason to crack down on the crypto market. As a result, traditional banking institutions are likely to find it more tougher to do business with crypto players. Amid the current crisis at Silvergate, lawmakers have already asked banks to weigh their crypto risks and exposure to the asset class.
Global Macros Contributing to Bitcoin Fall
Apart from the crisis at Silvergate Bank, the uncertain global macro conditions have also contributed to the selling pressure in crypto. On Thursday, March 8, Nasdaq Composite (INDEXNASDAQ: .IXIC) dropped by more than 2% to 11,338 levels.
The sentiment on Wall Street has turned quite negative after President Joe Biden proposed a series of tax increases on investors and the wealthy. While outlining a federal budget on Thursday, President Biden said that they plan to eliminate tax subsidies and reduce deficits by $5.5 trillion over the next ten years.
Besides, the commentary from the White House notes that reducing tax subsidies on cryptocurrencies would also deliver them an estimated savings of $24 billion a year. Thus, the subsidy dubbed “tax-loss harvesting” will no longer be available to investors.
Not stopping here, President Biden also imposed a staggering 30% tax on all electricity used to mine Bitcoin. Along with Bitcoin, the altcoins too have been bleeding.
The world’s largest altcoin Ethereum (ETH) is down 8.40% and is currently trading at $1,409 and a market cap of $172 billion. Another reason behind ETH’s collapse is that the New York Attorney General sued KuCoin alleging that the crypto exchange offered unregistered securities. Furthermore, the lawsuit states that ETH, Luna and TerraUSD were securities.