The reason behind the recent market disruption was a loss of liquidity, as Silvergate Bank served as a gateway for many cryptocurrency exchanges
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FXMAG.COM: Last week Bitcoin plunged, what would you address this decline to?
Dominik Podlaski (Bitget): The recent plunge in Bitcoin was primarily caused by the condition of Silvergate Bank, despite the presence of various other FUDs (abbreviation for: fear, uncertainty, and doubt) in the cryptocurrency market. The news triggered a strong bearish sentiment, while also limiting liquidity and the ability for traders to hedge against or protect overleveraged positions. As a result, the price drop occurred rapidly and the subsequent price action appeared unnatural.
The reason behind the recent market disruption was a loss of liquidity, as Silvergate Bank served as a gateway for many cryptocurrency exchanges. When the bank became a target of the SEC and panic ensued, many clients fled and the flow of money collapsed. Traders were unable to fund their accounts on the exchanges to counter unfavorable positions, leading to a significant drop in the market, represented by one large red candle.
