The news of tougher tax pressure on miners in the U.S. significantly affected the quotations of cryptocurrencies, reinforcing the effect of Silvergate Bank’s “voluntary liquidation.” Representatives of the American banking sector associated with venture capital crypto investments also found themselves in danger.
The U.S. Department of the Treasury published an explanatory document for the 2024 budget. In particular, the paper contains plans to impose a 30% tax on electricity usage for mining companies. The proposal, aimed at “reducing mining activity,” had an immediate impact on the crypto market, whose cap decreased by almost 8% overnight, according to CoinGecko.
Bitcoin dipped below $20,000 amid the document’s publication, dropping by 8% overnight. The overall decline in the value in the last week exceeded 15%. Other cryptocurrencies from the top 10 are also experiencing pressure on the price during the last seven days, staying in the “red zone”:
- ETH — 14%;
- BNB — 9%;
- ADA — 12%;
- DOGE — 18%;
- MATIC — 19%.
The data is provided by CoinGecko as of 10:00 (GMT+2), March 10. It should be noted that other factors also put pressure on the quotes of digital assets:
- A lawsuit against the KuCoin exchange filed by the Attorney General for the State of New York Letitia James.
- The announcement by Jerome Powell, Chairman of the Fed, that the inflation rate in February exceeded the regulator’s forecasts, so further interest rate hikes are to be expected.
- Silvergate Bank management’s decision on the “voluntary liquidation.”
The latter factor destabilizes not only the cryptocurrency market but also affects the U.S. banking system. Thus, Silicon Valley Bank, one of the 20 largest U.S. banks, faced problems. Specifically, the bank also served VC firms oriented on the crypto market, such as Sequoia Capital and Andreessen Horowitz (a16z).
The bank representatives informed in the recent report that they sold securities for $21 billion to strengthen the balance, having fixed a loss of $1.8 billion. Moreover, SVB sold shares for $1.75 billion and attracted additional $500 million from the venture capital company General Atlantic.
The SVB management explained these decisions by the fact that in the short term, it expects:
- higher interest rates;
- pressures on public and private markets;
- higher level of spending money by the bank’s institutional clients, which they invest in their businesses, i.e., capital outflows.
However, the report data collapsed Silicon Valley Bank stock — its price fell by more than 60% overnight, resulting in a total loss of about $80 billion in the bank’s stock price.
SVB CEO Greg Becker commented to The Information that the bank had “ample liquidity to support clients” and urged investors to “stay calm” and not to amplify rumors about SVB’s problems. In a letter to shareholders and investors, SVB CEO said the bank was “well-capitalized” and had “one of the lowest loan-to-deposit ratios” of any bank of its size, and the funds raised were planned to be reinvested in a greater number of assets, including short-term securities.
Venture capitalists began to support SVB, but experts say there’s growing concern among customers that it could trigger an outflow of capital and a domino effect among other banks. FTX suffered a similar fate.
