03.03.2023 – The cleansing process in the e-currency market continues. Now, new rumors surrounding the crypto bank Silvergate Capital are causing unrest. This is depressing the prices of Bitcoin, Ethereum and co. Until the big cleanup in the market is completed, traders must expect setbacks. Which ultimately also brings short opportunities.
Rude awakening for the bulls: Ether has torn a small price gap because of the news, in the picture the hourly chart. According to “Finanzen.net”, the market value of all Internet currencies slid by about four percent to around $1.03 trillion.
Source: Bernstein Bank GmbH
Silvergate provides financial services for many crypto exchanges, such as a payment network for real-time transfers. That could now be coming to an end. The company had warned that a continuation of the business was questionable. In addition, Silvergate postponed its financial statement presentation. The share of Silvergate capital had slumped thereupon on the New York Stock Exchange on yesterday’s Thursday by scarcely 60 per cent.
Collateral damage from FTX
With this, we see another casualty from the collapse of the FTX exchange – many of Silvergate’s customers had subsequently withdrawn their money. Crypto trading sites like Coinbase reacted according to “Wirtschaftswoche” and froze the business – Coinbase does not accept deposits and withdrawals via Silvergate anymore. We think: When the bank run in the realm of e-currencies will end is completely open.
It gets worse: The bank from La Jolla in California reported according to the “Frankfurter Allgemeine Zeitung” that the legal authorities are investigating the business conduct. This confirmed allegations by short sellers that auditors and U.S. regulators had warned in detail of misconduct by Silvergate, including money laundering allegations. Bloomberg had already reported last month, citing insiders, that the Justice Department’s fraud division was investigating Silvergate over its dealings with FTX and hedge fund Alameda Research.
Interest rate turnaround and taxes
That leaves two other reasons for the current headwinds in the cyber market: The turnaround in interest rates is making saving more attractive again. Moreover, government bonds or fixed-term deposits do not carry the risks that Bitcoin, Ether and co. do. What’s more, the tax authorities are actually intervening in this country. According to “Wirtschaftswoche,” the Federal Fiscal Court in Munich ruled that anyone who makes profits when trading in e-currencies must also pay tax on them (IX R 3/22). This means that a plaintiff from Cologne failed before Germany’s highest fiscal court, who had made a profit of 3.4 million euros in 2018.
Our conclusion: the mistrust in e-currencies persists, FTX has not yet been worked off. Whether long or short – Bernstein Bank wishes successful trades and investments!
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