Cryptocurrency market knocked out? Crypto collects blows from various sides

Cryptocurrency prices plummeted after bad news came from every possible front. President Biden, when setting out his 2024 budget plan, was supposed to make a proposal regarding high tax on electricity used to mine cryptocurrencies. Further, the relief regarding the possibility of settling losses from crypto assets is to be abolished, and finally the capital gains tax is to be increased. There was also the topic of recognition ETH for a security.

The Fed warns against investing in cryptocurrencies

As if that wasn't enough, he's the vice president Federal Reserve supervision Michael Barr said on Thursday that banks should be wary of investing in risky cryptocurrency assets, noting that regulators will soon provide guidance on how to manage these assets.

Banks should take a cautious approach when engaging in activities related to cryptocurrency assets and the cryptocurrency sector. We would probably view it as dangerous and unwise for banks to directly hold cryptocurrency assets on their balance sheets — Barr noted.

Barr also confirmed that the Fed will tighten oversight of these activities after several major scandals have rocked the cryptocurrency industry over the past year, sending cryptocurrency prices to multi-year lows.

Additionally, the world's leading cryptocurrencies fell on Thursday after news that Silvergate Capital Corporation will close its cryptocurrency lending bank after the company suffered a loss of $948 million at the end of the fourth quarter.

Silicon Valley Bank in trouble

Fear has also been fueled by the massive problems of the Silicon Valley Bank. The bank mainly did business with technology companies and start-ups. The bank sold a $21 billion bond portfolio at a huge loss to boost liquidity. The bank incurred a huge loss of $1,8 billion on this sale. This is more than the net profit of the entire company in 2021 ($ 1,5 billion). Now, SVB plans to sell $2,3 billion worth of shares to cover bond losses. The bank is trying to maintain liquidity, but this may be difficult in the current circumstances.

Fear fell on other banks in the US, which also began to lose value sharply, reminiscent of the times of the collapse of Bear Stearns or Lehman Brothers. The capitalization of the four largest banks fell by $52 billion on Thursday.

Yesterday, bitcoin fell about 6%, which was the largest daily drop since the collapse of the FTX exchange. The price of the largest cryptocurrency has retreated below USD 20000. It seems that this is not the end of emotions this week, because of the events that are scheduled, at 14:30 CET we will get data from the US labor market. This may affect further actions of the Fed and risk sentiment.