Silvergate bankruptcy and the Fed drive Bitcoin to its lowest level in a month

The main news of the last day has been the failure of cryptobank Silvergate. The once partner of some of the biggest players in the industry such as Binance, Coinbase or the bankrupt FTX voluntarily ended its operations after a turbulent week in which it had been sinking little by little into the mire. It should be recalled that Silvergate announced last Friday that it would delay the release of its annual results due to "a number of circumstances that will adversely affect the timing and unaudited results."

As if that were not enough, cryptos have had to deal with a tougher-than-expected Federal Reserve (Fed). In his dual appearance before U.S. policymakers, Chairman Jerome Powell indicated that the terminal level of interest rates will be higher than anticipated due to data from the world's leading economy, which have shown that the labor market is stronger than expected and that inflation is falling more slowly than the agency would like. "We have not yet made any decisions about the March meeting," Powell assured the House of Representatives on Wednesday, although he again stressed that the Fed is not "on the preset path."

"Powell added a very small tweak to his Tuesday language, and said that the data will determine whether the Fed would increase the pace of the interest rate hikes, but that ‘no decision has been made on this’ yet. If Powell’s intention was to cool down the 50bp hike bets yesterday, it didn’t go according to the plan," explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank. In this regard, CME's FedWatch tool estimates that there is about an 80% probability that the central bank will take interest rates up to the 500-525 basis point range. Just a week ago, the probability of a hike of this magnitude was barely over 30%.

The latest data releases continue to provide reasons for the Fed to step on the accelerator again. Tuesday's ADP employment survey data for February and job openings (JOLTS) for January, both of which readings fell less than expected, were released. "In other words, the jobs data was again too strong to soften the Fed hawks’ hand," Ozkardeskaya stressed. The official jobs data, due Friday, and February CPI, due next Tuesday, will finish clearing market doubts.

"I suspect that we could again test the lows that were reached last year as a result of hiked rates, but also because of the Fed’s ongoing monetary tightening regime that is draining liquidity out of the markets," explained Quinn Thompson, director of capital markets at Maple.

According to this expert, "a lot of this tightened monetary policy is being priced into the fixed income markets. But risk assets have yet to price in the potential for downside spillover, and this could spell trouble for equities and crypto."

In other market news, there have been falls in the main altcoins. Highlights include a plunge of more than 6% in Polygon (MATIC) and losses of more than 4% in Solana (SOL). On the positive side, Ripple (XRP) rallies nearly 4%.