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Why is Bitcoin price down today?

Bitcoin price is down today after Silvergate bank liquidity concerns combine with an exchange margin cascade, pressuring crypto markets.

The Bitcoin price is down today as cryptocurrency markets react to fresh FTX fallout and BTC bulls fail to defend already weak support.

BTC/USD 1-day candle chart (Bitstamp). Source: TradingView

Bitcoin  fell 5% in a single hour overnight into March 3, dropping to its lowest levels in over two weeks, data from Cointelegraph Markets Pro and TradingView shows.

The largest cryptocurrency joined Ether  ETH $1,573 and other major altcoins in a sharp comedown fueled mainly by concerns over Silvergate bank.

Analysts continue to see how the move will play out after BTC/USD preserved $22,000 as support. Some are calling for calm, while others believe that Bitcoin is still due a deeper retracement.

Cointelegraph takes a look at three major factors currently dictating crypto market trends.

Silvergate echoes FTX aftermath

The main talking point — and cause of pain for Bitcoin bulls — comes in the form of Silvergate bank.

Formally a banking partner for many of the crypto industry’s best-known names, these have begun reducing or abandoning their partnerships with Silvergate amid the possibility that it may be “less than well capitalized.”

Those words came from the bank itself, which in a filing to the United States Securities and Exchange Commission (SEC) this week delayed its annual 10-K report.

On the back of the move, U.S. exchange Coinbase announced that it had stopped using Silvergate, with then following suit.

Stablecoin giant Circle subsequently stated that it was “sensitive to the concerns around Silvergate” and was “in the process of unwinding certain services with them.”

The episode marks the latest in the longrunning debacle which began with the bankruptcy of exchange FTX, to which many crypto firms had significant exposure.

With the shares of Silvergate parent company Silvergate Capital (SI) dropping almost 60% to all-time lows, Bitcoin nonetheless managed to avoid significant damage, commentators noted.

“Silvergate going down and exchanges losing their banking doesn’t impact Bitcoin,” Samson Mow, CEO of crypto tech provider Blockstream, reacted on Twitter.

“The collapse of fiat banking for exchanges will just mean buying/trading goes P2P. Just like in China. There’s still a robust P2P trading ecosystem with exchanges gone.”

A further post argued that “What’s happening to Silvergate now can happen to any bank.”

“Be your own bank,” Mow added.

BTC price already lacked support

For some traders, the leg down for Bitcoin was already a matter of time.

As Cointelegraph reported, BTC price action has spent weeks trying and failing to overcome resistance above $25,000, resulting in its most stagnant month on record.

With whale liquidity on exchanges also arguably contributing to the lack of organic price moves, a comedown came as little surprise.

“There is our drop to ltf support as expected- now bulls have to make a stand here,” popuular trader Credible Crypto wrote in an update.

“If they fail to, then my downside target will be met sooner rather than later.”

An accompanying chart showed that target as lying around the $20,000 mark — a key psychological level originally reclaimed as support in January.

BTC/USD annotated chart. Source: Credible Crypto/ Twitter

Margin call “smokes” crypto longs

Trading resource Skew meanwhile eyed one transaction in particular which it said caused the majority of the sharp downmove to multi-week lows on BTC/USD.

Related: 3 BTC price hurdles Bitcoin bulls are failing to clear in 2023

“BTC well no sharp squeeze up but sharp margin cascade here,” it revealed.

“What led this move is a large binance spot sale directly into an area of stacked up longs. Margin call.”

BTC/USD annotated chart. Source: Skew/ Twitter

As a measure of how unprepared for a pullback the majority of traders were, long liquidations hit multi-month highs on March 3.

According to data from Coinglass, BTC long liquidations alone totaled $72.9 million at the time of writing. Cross-crypto liquidations stood at $205 million.

BTC liquidations chart. Source: Coinglass

“Bybit longs got absolutely smoked, probably a short-term bottom here,” macro commentator Tedtalksmacro responded.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

US lawmakers argue SEC accounting policy places crypto customers at risk

While the bulletin was intended to provide clarity regarding the accounting treatment for digital assets, it has been criticized by both lawmakers and regulators.

Two United States lawmakers have criticized crypto accounting guidelines outlined by the national securities regulator, arguing they places crypto customers at greater risk of loss.

The guidelines came from the United States Securities and Exchange Commission and became effective in April last year.

The guidelines ask financial companies holding crypto for customers to recognize all digital assets they do not control as a liability. They also state that digital assets should be backed by a safeguarding asset.

Crypto companies must show liabilities equal to ALL customer crypto assets, according to SEC’s new rule SAB 121 issued in March 2022.@coinbase complied for their Q2 filing and now shows an $88B “customer crypto liabilities” 

— Cory #Bitcoin WORKS (@coryklippsten) August 15, 2022

However, Senator Cynthia Lummis and Representative Patrick McHenry argued on March 2 that these guidelines will “likely” discourage regulated entities from engaging in digital asset custody, which is the opposite effect of what the regulator should be doing.

In a letter to ranking individuals with the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration, the lawmakers argued that while Staff Accounting Bulletin (SAB) 121 was intended to provide clarity on accounting treatment for digital assets, it carried negative side effects. They wrote:

“SAB 121 places customer assets at greater risk of loss if a custodian becomes insolvent or enters receivership, violating the SEC’s fundamental mission to protect customers.”

The lawmakers argue the effect of SAB 121 will be to “deny millions of Americans access to safe and secure custodial arrangements for digital assets.”

“In sum, the effect of SAB 121 is to deny millions of Americans access to safe and secure custodial arrangements for digital assets.”

⬇️⬇️ My letter with @PatrickMcHenry 

— Senator Cynthia Lummis (@SenLummis) March 2, 2023

The lawmakers also disagreed with the “breadth of the ‘digital asset’ definition in SAB 121,” arguing that “a more nuanced hierarchy for this asset class which considers the opportunities and risks of digital assets with different functions is necessary.”

Related: SEC chair implies crypto exchanges may not be ‘qualified custodians’ as new rule is drafted

Lawmakers including Lummis have kicked up a fuss over the SEC accounting bulletin in the past.

Last year, five Republican senators, including Lummis, sent a letter to the SEC on June 16, sharing their concern that the bulletin amounted to “regulation disguised as staff guidance” and did not adhere to the Administrative Procedure Act.

SEC commissioner Hester Peirce shared similar concerns on March 31, soon after the bulletin was released, noting it was “the way the change is being made” rather than the accounting determination itself she took issue with. She characterized the change as:

“Yet another manifestation of the Securities and Exchange Commission’s scattershot and inefficient approach to crypto.”

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