More than $70 billion wiped off crypto market in 24 hours as bitcoin drops 8% below $20,000

Bitcoin briefly fell 8% to below $20,000 on Friday, hitting a near-two-month low, after a stock market sell-off in the U.S. and the collapse of a crypto-focused lender.

The cryptocurrency market saw more than $70 billion wiped off its value over the course of the 24 hours.

Bitcoin was last trading lower by just 2.6% at $19,959.61, according to Coin Metrics. Ether was last down more than 3% at $1,400.63.

The crypto sell-off has been prompted by a number of factors. The movement of cryptocurrency prices is quite closely correlated to U.S. stock markets, in particular the tech-heavy Nasdaq. On Thursday, major U.S. indices closed lower.

On Tuesday, U.S. Federal Reserve Chairman Jerome Powell indicated that interest rates may go higher —and stay higher — than expected. The raising of interest rates over the past year has weighed on risk assets such as stocks, and in particular cryptocurrencies.

“There is just little reason to buy bitcoin now as the market is saturated with negative developments, not just specifically for the crypto industry, but also for the wider financial market as well,” Yuya Hasegawa, an analyst at Japanese crypto firm Bitbank, told CNBC via email.

Another major factor weighing on crypto prices is the collapse of Silvergate Capital, a major lender to the crytpo industry. Silvergate said Wednesday it is winding down operations and liquidating its bank.

Silvergate’s fall is another example how the collapse of major cryptocurrency exchange FTX continues to have an impact on the industry. FTX was a big customer of Silvergate.

Separately, Silicon Valley Bank said late Wednesday that it sold off $21 billion worth of its holdings at a $1.8 billion loss. SVB is a major bank in the technology start-up space. Providing traditional banking services while also funding tech projects, it is considered a backbone of the venture capital industry in the U.S.

The sale of assets comes as SVB grapples with a weaker technology funding environment as VCs remain cautious amid a weaker macroeconomic situation and rising interest rates.

Both Silvergate and SVB put their money into U.S. Treasurys which have lost value as the Fed has raised rates. These banks have been forced to sell these bonds at a loss to shore up their capital position.

“Overall, sentiment seems to have turned quite bearish given a combination of global macro and interest rate rises but also the exposure many banks probably have to long duration securities,” Vijay Ayyar, vice president of corporate development at crypto exchange Luno, told CNBC via email.