Bitcoin (BTC-USD) fell more than 7.5% late Thursday to $20,300, a seven week low for the largest cryptocurrency.
“This remains a tough environment for crypto. Bitcoin could see further selling pressure test the $20,000 level,” Edward Moya, a senior market analyst with Oanda said.
Ether (ETH-USD) is down by the same amount of this period, currently changing hands at $1,439 per coin.
Crypto’s total market capitalization fell more than 6% through Thursday from $1 trillion to $942 billion as measured by Coinmarketcap.
“It won’t be a smooth transition for the industry at all,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, told Yahoo Finance.
Silvergate offered a payments network that allowed customers to exchange U.S. dollars between accounts 24/7 to match the liquidity needs of the crypto market. The bank suspended the offering last Friday.
The other most amenable bank to crypto firms, Signature Bank (SBNY), is also actively reducing its exposure to digital asset business. “If small banks such as Customers and Pathward (formerly MetaBank) don’t step in to fill the gap, other alternatives include the Euro and non-dollar backed stablecoins, Conor Ryder,” an analyst for Kaiko said Thursday.
“It’s a blow to the ecosystem but its unlikely to be a permanent one,” Acheson added.
Crypto markets were also under pressure Thursday as broader financial stresses in the banking sector emerged amid new challenges as Silicon Valley Bank, news which sent shares of its parent company SVB Financial down 60% on Thursday as the benchmark S&P 500 fell some 1.8%.
Elsewhere, the Biden Administration is proposing to raise $24 billion for the U.S. government by closing a tax loophole. The loophole allows investors to harvest their crypto losses to offset capital gains and income for individuals.
“As other countries are bringing crypto safely into the regulatory perimeter, we should be doing the same,” said Paul Grewal, Coinbase’s chief legal officer, before a U.S. House Financial Services Committee Thursday afternoon.
Largest among U.S. crypto firms, Coinbase (COIN) has several banking partners and is not at immediate risk from Silvergate’s liquidation given the exchange ended business with the firm last week.
Even so, CFRA Research has chosen to maintain its hold rating on shares of Coinbase at neutral.
“Although COIN has more measured exposure directly to SI, indirect impacts around the health of like-kind clients and/or general investor enthusiasm (i.e., trading activity) could also create an overhang on COIN’s fundamentals,” CFRA analyst David Holt said in a Thursday note.
Shares of Coinbase fell 7.8% Thursday to $58.
The Office of the New York Attorney General is also suing KuCoin, the fourth largest crypto exchange by trading volume for failing to register as a securities and commodities broker-dealer
“My office is taking action against cryptocurrency companies that are brazenly disregarding our laws and putting investors at risk,” Attorney General Letita James said in the release.
David Hollerith is a reporter for Yahoo Finance. Follow him on Twitter @DSHollers