Liquidation in Crypto Market Hits $206 Million in One Hour: Here is Why

By 0xGorki On Mar 3, 2023

On March 3rd, the cryptocurrency market experienced a sharp decline in value. Ethereum fell by 5.2%, Bitcoin by 4.9%, LTC by 10%, XRP by 4%, DOT by 8,3%, SOL by 7%, ETC by 7,5%, BSV by 18%, and FIL by 10%.

According to Coinglass, the liquidation of the entire network in one hour exceeded $203 million. Over the past 24 hours, more than 81,000 traders were liquidated for a total of $237.2 million, with most of the money coming from long positions.

The crypto market capitalization also dropped by around 5%, or $50 billion USD. Since February, the capitalization chart has been relatively stable, hovering around $1,000-1,040 billion. However, the trend has been leaning towards the downside.

The Crypto Fear and Greed Index, which measures market sentiment using factors such as volatility, social media activity, surveys, and momentum, currently stands at 50. The index provides a snapshot of the Bitcoin market’s mood and presents the data on a scale of 0 to 100, with zero indicating “Extreme Fear” and 100 indicating “Extreme Greed.” Additional information on the data sources used in the index can be found below.

Here is Why

According to a recent report by FTX, the total deficit recorded by FTX was $8.6 billion USD, while FTX US recorded a deficit of $116 million USD.

The sudden drop in prices has left investors and market analysts speculating on the possible causes of the decline. Some have attributed the decline to a technical correction in the market, while others believe it may be related to concerns over rising inflation rates and a potential interest rate hike by the Federal Reserve.

In the midst of this market turmoil, news has emerged that Signature Bank, a federally regulated US bank that has actively courted digital assets, is reportedly one of the few banks that have not faced significant stress due to its exposure to FTX. Its competitor, Silvergate, is facing accusations of co-mingling exchange and Alameda investment funds. In Dec. 2022, Signature Bank planned to offload up to $10 billion in deposits related to the cryptocurrency industry, a significant shift for a bank that had aggressively pursued digital asset clients. The move was intended to reduce the share of crypto-related deposits to less than 15% of total deposits, down from the current 23%.

Several cryptocurrency companies have temporarily stopped accepting deposits made via Silvergate Bank. Gemini has stopped accepting deposits and withdrawal requests made via ACH or wire transfer through Silvergate Bank, stating that it is “actively monitoring the situation” and has no customer or GUSD funds stored with Silvergate. Bitstamp has temporarily stopped supporting US dollar transfers via Silvergate and has halted Silvergate Exchange Network (SEN) services. Crypto.com has temporarily suspended USD deposits and withdrawals via Silvergate, and funds transferred in this way would be rejected.

MicroStrategy stated that it has a loan from Silvergate due in early 2025, but the loan would not accelerate if Silvergate fails. It also confirmed that it has no Bitcoin collateral stored with Silvergate and no other financial relationship with the bank.

We have a loan from Silvergate not due until Q1 ‘25. There are mkt concerns re SI’s fin. condition. For anyone wondering, the loan wouldn’t accelerate b/c of SI insolvency or bankruptcy. Our BTC collateral isn’t custodied w/ SI & we have no other financial relationship w/ SI.

— MicroStrategy (@MicroStrategy) March 2, 2023

The crypto market is known for its volatility, and this recent drop in value is not entirely unexpected. However, the news regarding Silvergate has caused concern among cryptocurrency companies and investors. It remains to be seen how this situation will develop in the coming days and weeks.

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