Silvergate Bank, a lender that helped customers move money in and out crypto, will “voluntarily liquidate” its assets and wind down operations, its holding company, Silvergate Capital (SI), said Wednesday. The bank was under fire after announcing a week ago it would delay filing its annual 10-K report. It had to liquidate much of its holdings late last year to meet customers’ requests for withdrawals in the aftermath of the collapse of crypto exchange FTX. Silvergate turned its focus to crypto 10 years ago. It was a local commercial real estate lender in San Diego before.
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The collapse of Silvergate Bank is dragging down bitcoin volume. CryptoQuant data shows that transfer volume, denominated in BTC, is down 35% over the last 24 hours. At the same time, the total number of transactions on the Bitcoin blockchain has dropped by 17%, and the number of active addresses has fallen by 10%. So far in March, daily bitcoin trading volume has averaged around $25 billion, according to data from CoinGecko, versus $36 billion in February. “Coupled with the drop in the price of bitcoin, we have seen a noticeable drop in trading volumes, too, across the ecosystem when news about Silvergate’s financial difficulties broke,” said Guilhem Chaumont, CEO of crypto market maker Flowdesk.
JPMorgan is ending its banking relationship with Gemini, the cryptocurrency exchange owned by entrepreneurs and twins Cameron and Tyler Winklevoss, according to a person familiar with the situation. In early 2020, JPMorgan took on Gemini and U.S.-listed exchange Coinbase as customers, the Wall Street Journal reported. Coinbase’s banking relationship with JPMorgan remains intact, a spokesperson for the San Francisco-based exchange confirmed. Gemini didn’t respond to requests for comment. In a tweet sent after the publication of this article, however, Gemini wrote, “Despite reporting to the contrary, Gemini’s banking relationship remains intact with JPMorgan.” Reuters has also since reported on the matter.
Market Insight: Traders See More Declines
Silvergate Bank’s decision to wind down operations amid the worsening macroeconomic picture has fueled digital-asset investor anxiety, spurring demand for derivatives that offer protection against price slides in major tokens.
At press time, the 30-day bitcoin skew, derived by looking at the difference in implied volatility/demand for cheap out-of-the-money (OTM) calls and OTM put options expiring in four weeks, shows the strongest bias for bearish put options in over two months.
That’s a sign investors are worried about a deeper slide in the bitcoin price and are buying put options to hedge their long spot or futures positions, or are simply looking to profit from potential bearish price action.
The chart shows the MOVE index, which tracks volatility in the U.S. Treasury market, continues to rise and has reached its highest level since December.
“Higher volatility for assets that are supposed to be the safest in the world is not exactly a vote of confidence,” Noelle Acheson, author of the Crypto is Macro Now newsletter, wrote in Wednesday’s edition.
The crypto market is one of the purest liquidity plays, and liquidity is affected by asset price volatility. Higher volatility in bonds means increased collateral requirements.
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