Bitcoin Takes a 5% Hit. Here's Why

GM Readers!📪 It's BitDegree Insider, and let's make the first spring's Friday count.

⭐️Today's selection:

• 📉Bitcoin Falls Over 5%
• 🏦Silvergate Bank on the Brink of Collapse?
• 🧩️Answer To Yesterday's Puzzle
• 👌Selected Meme of The Day
• 📰Bite-Sized News

BITCOIN DOWN BY 5%

Bitcoin, the world's most popular cryptocurrency, fell over 5% early on Friday.

This drop was a reaction to concerns about Silvergate Capital, a bank that has been in the news for its possible involvement in the FTX fraud scheme.

Glassnode, an analyst portal, reported that exchanges liquidated more than $62 million worth of long (bullish) BTC futures on Friday, forcing traders to close their positions due to a loss of margin, full or partial.

But what does it mean when we say "liquidation" or "long futures"? Let's break it down.

When you trade in the futures market, you agree to buy or sell an asset at a specific price on a specific date in the future. A long future is when a trader agrees to buy an asset at a certain price in the future, hoping that the price will increase.

Liquidation is the forced closure of a trader's position by an exchange due to a loss of margin, which is the amount of money that a trader needs to keep in their account to cover their positions.

In simple terms, traders who were betting on Bitcoin's price to rise (long futures) were forced to close their positions due to a loss of margin, resulting in the liquidation of their trades.

This forced liquidation is often a sign of impending turbulence in the market.

If you still feel lost, here's a step-by-step explanation:

1. Traders buy Bitcoin futures contracts that bet on Bitcoin's price going up (known as "long" contracts).
2. These contracts allow traders to use leverage, meaning they can borrow money from the exchange to increase their buying power.
3. The exchange sets a margin requirement, which is the minimum amount of money traders must maintain in their accounts to keep their positions open.
4. If the price of Bitcoin drops significantly, the value of the traders' positions may also drop, and they may not have enough money in their accounts to meet the margin requirement.
5. When this happens, the exchange may issue a margin call, which requires traders to add more funds to their accounts or close their positions.
6. If traders are unable to meet the margin call, the exchange may forcibly close their positions to limit their losses. This is known as a "liquidation".
7. In this case, Glassnode reported that exchanges were forced to liquidate more than $62 million worth of long positions on Friday due to a loss of margin, meaning traders couldn't meet the margin requirement and had their positions automatically closed out by the exchange.

So, the gist of the story is this:

The concerns around Silvergate Capital made traders nervous, and the forced liquidation of long futures worth over $62 million has led to a decline in the price of Bitcoin.

No one knows for sure whether this decline is only beginning, as more companies distance themselves from the troubled bank.

MicroStrategy and Tether are among the companies that have already cut ties with Silvergate.

Other organizations like Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos have also publicly announced that they are no longer affiliated with the bank.

This loss of business from major players in the crypto world is likely to have significant consequences for Silvergate's future.

The bank has already incurred record losses and cut staff by 40% in response to its financial troubles.

With more companies abandoning ship, it's uncertain how much longer the bank can continue to operate in its current state. 

TL;DR: Concerns and worries about Silvergate Capital, a bank, has caused a significant decrease in Bitcoin's value, as it fell by 5% in one day. It happened as over $62 million worth of long BTC futures got liquidated.

Silvergate Capital Situation

Also, there are no unfounded rumors about Silvergate going bankrupt. They are due to the fact that the bank has been unable to file its 10-K annual report with the SEC on time.

Silvergate said they won't be able to meet the March 16 deadline for filing. That further fueled the partners' fears about the bank's financial situation and led to a decline in its share price.

In fact, Silvergate shares have fallen 56% since the beginning of the week and are currently valued at just $5.9, a significant drop from their value of over $100 a year ago.

At the end of the day, It all just goes to show that there's no such thing as a completely safe investment, no matter how much you may try to convince yourself otherwise.

So let's raise a glass to the wild and unpredictable world of cryptocurrency, where anything can happen and investors are always on their toes. Let's hope for the best in the long term!

TL;DR: Silvergate Capital's shares have fallen 56% since the beginning of the week. Rumors have it, that the bank may be facing bankruptcy

ANSWER TO YESTERDAY'S PUZZLE

Yesterday we asked you this. Majority got the right answer! (again)

For those who felt lost, here's an explanation:

So... The right answer is... 5!

SELECTED MEME OF THE DAY

BITE-SIZED NEWS

• Xapo Becomes First Fully-Licensed Bank To Adopt Bitcoin Lightning Network. Xapo Bank users can pay for small purchases of up to $100 in BTC.
• US Senators Led by Elizabeth Warren Sent Letters to Binance and Binance.US CEOs. The letters accuse Binance and Binance.US of being a "hotbed of illicit financial" activities.
• US Judge Criticizes SEC's Objection to Voyager Digital Restructuring Plan. It was a heated exchange.