The digital currency fell as low as $19,783 on Friday
6/15/2022, 03:05 PM
Bitcoin and other cryptocurrencies are in free fall. The sell-off in cryptocurrencies deepened on Wednesday, with Bitcoin plunging close to the key level of $20,000.
Bitcoin tumbled as much as 10% to a low of $20,166 during the day, according to Coinbase data. It was last traded at $21,658, down about 3%. The world’s largest digital currency has plunged nearly 70% since the peak of crypto mania in November 2021. Charlie Morris, founder of digital asset management firm ByteTree, said $20,000 was close to the peak of Bitcoin’s last big bull run in 2017 and so “could prove to be a support level.”
Rising inflation, aggressive interest rate hikes, and liquidity problems at a major player in the crypto space have plagued crypto markets. It is widely expected that the Federal Reserve will raise interest rates by 75 basis points this week, a move that has spooked stocks and other risky assets—including crypto. Mostafa Al-Mashita, executive vice president of Canadian crypto firm SDM, said crypto had fallen into the broader “risk-off” environment that was affecting markets. Asset manager saysSquawk Box Europe“
What we’re seeing are the effects of a deteriorating macroeconomic trend where inflation is rising due to supply chain issues,” he said.
Celsius FalloutEarlier this week, crypto lending firm Celsius began to block users’ access to their funds, raising speculation that the company could soon be insolvent. Investors are worried that a potential Celsius liquidation could further hurt crypto and potentially bring down other large players if their holdings are “liquidated on Bitcoin and Ethereum,” said Marcus Sotiriou, analyst at UK-based digital asset broker GlobalBlock. Celsius holds a lot of assets in the DeFi space, i.e. including staked Ether, a token offered by crypto startup Lido Finance that is supposed to have the same value as Ether, the second-largest cryptocurrency. Staked Ether is essentially an IOU that investors buy to earn rewards on their Ether holdings. The original Ether is locked up in a crypto equivalent of a vault and can only be accessed once the Ethereum blockchain successfully completes a long-awaited upgrade. Celsius “may be forced to sell its holdings to meet redemptions as the underlying ETH is locked up with no redemption date in sight,” said Marc-Thomas Arjoon, research associate at CoinShares, in a note published Monday. The crypto market was already on shaky ground after two popular tokens collapsed last month, wiping out $60 billion in value. Now, major players in the industry are bracing for a long-term bear market known as the “crypto winter.” Numerous companies have slashed their costs, and Coinbase announced on Tuesday that it was laying off 1,100 employees. This has also led to speculation that Three Arrows Capital, a crypto hedge fund, is on the brink of collapse. Zu Shu, co-founder of the firm, said it was “in the process of communicating with our investors.”
Celsius FalloutEarlier this week, crypto lending firm Celsius began to block users’ access to their funds, raising speculation that the company could soon be insolvent. Investors are worried that a potential Celsius liquidation could further hurt crypto and potentially bring down other large players if their holdings are “liquidated on Bitcoin and Ethereum,” said Marcus Sotiriou, analyst at UK-based digital asset broker GlobalBlock. Celsius holds a lot of assets in the DeFi space, i.e. including staked Ether, a token offered by crypto startup Lido Finance that is supposed to have the same value as Ether, the second-largest cryptocurrency. Staked Ether is essentially an IOU that investors buy to earn rewards on their Ether holdings. The original Ether is locked up in a crypto equivalent of a vault and can only be accessed once the Ethereum blockchain successfully completes a long-awaited upgrade. Celsius “may be forced to sell its holdings to meet redemptions as the underlying ETH is locked up with no redemption date in sight,” said Marc-Thomas Arjoon, research associate at CoinShares, in a note published Monday. The crypto market was already on shaky ground after two popular tokens collapsed last month, wiping out $60 billion in value. Now, major players in the industry are bracing for a long-term bear market known as the “crypto winter.” Numerous companies have slashed their costs, and Coinbase announced on Tuesday that it was laying off 1,100 employees. This has also led to speculation that Three Arrows Capital, a crypto hedge fund, is on the brink of collapse. Zu Shu, co-founder of the firm, said it was “in the process of communicating with our investors.”