Bitcoin Slips Below $20,000 amidst Crypto Meltdown
Struggling to stay above key level, bitcoin price sits at around $20,000 on Monday amidst sustained cryptocurrency meltdown due to multiple pressures in the space. Large numbers of retail investors have lost out big while corporates’ interest remains flat.
The blockchain-powered industry has lost more than $2 trillion from peak period valuation in the last few months on selloffs, now trading below $1 trillion, though it has also hit bottom earlier in the month.
Bitcoin (BTCUSD) had dropped on Saturday to as low as $17,592.78, falling below $20,000 for the first time since December 2020. It has lost almost 60% of its value this year and 37% this month alone in the cryptocurrency sector’s latest meltdown.
Its fall follows problems at several major industry players. Further declines, market players said, could have a knock-on effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.
Crypto hedge fund Three Arrows Capital is exploring options including the sale of assets and a bailout by another firm, its founders told the Wall Street Journal in a story published Friday, the same day Asia-focused crypto lender Babel Finance said it would suspend withdrawals.
U.S.-based lender Celsius Network this month said it would suspend customer withdrawals. In a blog on Monday, Celsius said it would continue working with regulators and officials, but that it would pause its customer Q&A sessions.
“There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the entire amount of credit available in the crypto ecosystem is much reduced,” said Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2.
“It feels very like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.
Smaller tokens, which usually move in tandem with bitcoin, were also hurt. No.2 token ether (ETHUSD) was at $1,0752, having dipped below its own symbolic level of $1,000 over the weekend. READ: FOREX: US Dollar Slips after Currencies Traders Take Profits
The fall in crypto markets has coincided with a slide for equities, as U.S. stocks suffered their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession.
A fall in stablecoins – a type of crypto designed to hold a steady value – is also suggesting investors are pulling money from the sector as a whole. On another angle, Investors’ disagreements about the potential of Web3 grew louder amid this week’s sell-off in cryptocurrencies and revelations that crypto lending platform Celsius Network is essentially insolvent.
Celsius has halted withdrawals citing extreme market conditions. For similar reasons, hedge fund Three Arrows Capital has reportedly had difficulties covering redemptions.
The latest meltdown in cryptocurrency prices has put a damper on Web3 VC dealmaking and valuations. Proponents of Web3 hope that this new iteration of the internet, characterized by decentralized platforms based on blockchain technology, will eventually overturn the “evil” of big tech and traditional banks, allowing all users—not just founders, investors and employees—to benefit financially from their participation.
The market capitalization of all cryptocurrencies may have fallen by nearly two-thirds to below $1 trillion, but crypto enthusiasts are not the type to give up easily. # Bitcoin Slips Below $20,000 amidst Crypto Meltdown
