Data from CryptoQuant shows that active addresses and transfer volume have seen significant declines as Silvergate weighs heavy on the market.

Bitcoin traders are taking a breather and considering their next steps as the market digests the collapse of Silvergate Bank, which culminated in its “voluntary liquidation” Wednesday U.S. time.

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% during this same time period, and the number of active addresses has fallen by 10%.

For the month of March, bitcoin trading volume has come in at an average of around $25 billion, according to data from CoinGecko, versus around $36 billion for the month of 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,” Guilhem Chaumont, CEO of Paris-based market maker and brokerage Flowdesk, told CoinDesk in a note.

Silvergate was one of the major fiat payment rails in the crypto market, offering traditional banking services to exchanges and market makers. As such, trading volumes have dwindled since Silvergate’s problems became public.

Chaumont said that trading has since then been quiet, and suggests that the first shock has been priced in while traders digest the situation.

“It certainly has a ‘calm before the storm’ feel to it. So the market is not shaking it off — FTX has made us all very much aware that anything can happen,” he said. “However, the situation can still go either way — meaning that if news about a reassuring resolution came, the confidence that characterized the first two months of 2023 could return.”

Silvergate’s demise might accelerate the shift toward trading pairs denominated in the dollar-pegged stablecoins like tether (USDT).

“With the death of Silvergate, stablecoins will likely become even more ubiquitous among traders. Rather than deposit your dollars with an exchange, you deposit them with a stablecoin issuer, receive stablecoins and then transfer those to an exchange,” analysts at Paris-based crypto data provider Kaiko said in a note on Monday.

Most of the trading volume is already concentrated in USDT pairs. Data tracked by Kaiko show BTC/USDT pairs account for over 90% of the trading volume, up from 3% in 2017.

At the same time, the number of new crypto-USDT pair listings has been falling.

USDT daily volume is currently at an average of $32.3 billion per day so far in March, according to CoinGecko data, down from an average of $47 billion a day during February.

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BCB Group CEO Oliver von Landsberg-Sadie said he hopes to have dollar fiat-to-crypto rails in place and ready to go live early in the second quarter.

BCB Group, a payments processor that links crypto companies to the banking system, is accelerating plans to add U.S. dollar capabilities to help fill the hole left by the recently shuttered Silvergate Exchange Network (SEN), CEO Oliver von Landsberg-Sadie said in an interview with CoinDesk.

London-based BCB, which was the first crypto company to receive a payments license from U.K. regulator the Financial Conduct Authority (FCA), provides fiat-to-crypto rails for currencies including sterling, euros, Swiss francs and yen in Europe, particularly to institutional players such as Bitstamp, Galaxy Digital, Gemini and Kraken.

Banking has been a dicey issue for crypto companies, many of whom see the reinvention of traditional finance as their ultimate goal. Recent collapses and scandals have prompted a scattergun response from regulators in the U.S., and what could be viewed as a kind of choke point operation on crypto banking, at least as far as Silvergate is concerned.

BCB Group, a payments processor that links crypto companies to the banking system, is accelerating plans to add U.S. dollar capabilities to help fill the hole left by the recently shuttered Silvergate Exchange Network (SEN), CEO Oliver von Landsberg-Sadie said in an interview with CoinDesk.

London-based BCB, which was the first crypto company to receive a payments license from U.K. regulator the Financial Conduct Authority (FCA), provides fiat-to-crypto rails for currencies including sterling, euros, Swiss francs and yen in Europe, particularly to institutional players such as Bitstamp, Galaxy Digital, Gemini and Kraken.

Banking has been a dicey issue for crypto companies, many of whom see the reinvention of traditional finance as their ultimate goal. Recent collapses and scandals have prompted a scattergun response from regulators in the U.S., and what could be viewed as a kind of choke point operation on crypto banking, at least as far as Silvergate is concerned.

BCB launched its instant settlement network, the BCB Liquidity Interchange Network Consortium (BLINC), in mid-2020. It’s a real-time gross settlement system that does for euros, British pounds and Swiss francs what SEN did in the U.S. until recently for big crypto clients transacting in dollars.

It’s worth noting that NYC-based Signature Bank’s Signet, an equivalent to SEN, has to date been the next largest network for USD instant settlement and stands to fill some of the demand. That said, a BLINC dollar component has been in the works for about a year and is getting ready to launch, Landsberg-Sadie said.

“Obviously I’m going to try and bring that forward as quickly as possible,” he said in reference to news that Silvergate’s network is no longer running. “I’d like to say it could be live by spring, so we’ll do whatever it takes to make sure those who are stranded by SEN get some sort of continuity given the huge overlap of BCB and Silvergate clients.”

The key differences between BLINC and SEN is that the former is multicurrency and isn’t tied to a single credit institution, such as a Silvergate or Signature Bank, Landsberg-Sadie said. It was not designed to take deposits, he added, having been purpose built as a payment institution, providing onramps to a collection of banks in places like the U.K., Switzerland and Europe.

“It’s a decentralized model,” said Landsberg-Sadie. “What you have with Silvergate and Signature is a credit institution solution applied to what is primarily a payments problem. Silvergate’s troubles started when they allowed long-term bitcoin bets against short-term cash deposits, an impossible position to unwind in 2022’s crazy markets. BLINC funds are 1:1, unleveraged, un-rehypothecated, always precisely 1:1 with safeguarded funds.”

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Centralized exchanges liquidated bullish long futures worth over $62 million during the early Asian hours.

Bitcoin’s (BTC) early Friday slide, triggered by concerns about crypto-friendly bank Silvergate (SI), shook out bullish leverage from the futures market.

Exchanges liquidated longs or bullish bitcoin futures worth over $62 million during the Asian hours, the highest amount since August, according to data from Glassnode. Short liquidations worth just over $500,000 were also observed.

Liquidation happens when the market moves against a trader’s bullish/bearish bet, leaving them with insufficient funds to keep the leveraged trade open.

The dominance of long liquidations shows the leverage was skewed on the bullish side, meaning most traders were positioned for a price rally.

Bitcoin, the leading cryptocurrency by market value, fell over 5% to $22,000, reaching the lowest since Feb. 14, CoinDesk data show.
Shares in Silvergate fell 50% on Thursday after the crypto-friendly lender said it’s evaluating “its ability to continue as a going concern” and delayed filing its annual report with the Securities and Exchange Commission.

Bitcoin’s late reaction to Silverage news perhaps stemmed from fears that the crisis at the bank known to facilitate fund transfers between exchanges and other market participants may worsen the liquidity crunch in the crypto market.

Most exchanges on Thursday announced a suspension of business tied with Silvergate.

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JPMorgan cut its recommendation on the stock to “Underweight” from “Neutral” and withdrew its price target.

Silvergate Capital (SI) was downgraded to “Underweight” from “Neutral” by JPMorgan (JPM) after the crypto bank said that it was evaluating its ability to continue as a going concern and delayed the filing of its annual report on Wednesday.

The crypto-friendly bank said it needed to delay the filing of its annual 10-K for the 2022 fiscal year, and would take an additional two weeks to complete it.

The Wall Street giant also withdrew its price target for the stock, which was $14 a share previously. Silvergate shares fell 47% to $7.18 in premarket trading.

Silvergate’s rating was also downgraded to “Hold” from “Buy” by Canaccord Genuity. The broker also cut its price target on the stock to $9 from $25.

JPMorgan notes that in the recent quarter Silvergate realized a $886 million loss from selling underwater securities, resulting in tangible book value (TBV) being cut more than half to $12.93.

“With the company having sold additional securities (beyond what was guided) as a loss in January/February, this reflects that the company is facing continued liquidity challenges,” JPMorgan analysts led by Steven Alexopoulos wrote.

The fallout from the collapse of FTX has shaken the crypto market, with Silvergate directly impacted as the bank had around $1 billion of deposits from the now defunct exchange at the time of collapse, the report said.

In addition, the past few months has been a back and forth between short sellers and the company, with Silvergate responding publicly on multiple occasions in an attempt to maintain its ecosystem, the report added.

“Short-sellers appear to have contributed to a bank-run of sorts with Silvergate reporting a much greater level of deposit outflows than anticipated in the fourth quarter and this likely continuing so far in 1Q23,” the note said.

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