The price of bitcoin broke below the key threshold of $ 20,000 for the first time since November 2020, risking a new wave of sales and a deepening crisis in the digital assets sector.
The largest cryptocurrency, which acts as a benchmark for the wider crypto market, fell below $ 18,000 on Saturday, down about 14 percent. This brought it below the peak level of the previous trade movement in crypto markets in 2017 and erased years of profits for long-term holders.
Traditional financial markets were rocked this week after three major central banks, led by the US Federal Reserve, increased borrowing costs as part of efforts to reduce inflation. Global stocks posted their worst week since the darkest days of the pandemic in March 2020, as traders worried that aggressive action could halt global growth or even cause a recession.
The crypto market has come under particularly sharp pressure as the return race, sparked by huge efforts to stimulate central banks and governments in the midst of a pandemic, shifts sharply in the opposite direction.
Investors and executives have been anxiously watching the price of bitcoin in recent days, fearing that a drop below $ 20,000 could lead to forced liquidations of large leverage bets in markets, putting more pressure on the price and exacerbating the credit crunch that has already hit large crypto lenders and merchants.
In the last week, Celsius and Babel Financial, a pair of cryptocurrency companies, blocked withdrawals until Three Arrows failed to respond to creditors’ demands to raise additional funds to cover deteriorating bets. Last month, luna and terra – two tokens popular with cryptocurrencies seeking ultra-high incomes – crashed.
“Dominoes are falling now,” said Connor Ryder, an analyst at research and data provider Kaiko. “With more dominoes, there will probably be a lower price action, which will probably lead to a snowball with these liquidations.”
Bitcoin lost more than 70 percent of its value from its peak last fall as investors fled more speculative assets as global monetary tightening tightened from central banks. The total market value of cryptocurrencies fell below $ 1 trillion from a peak of $ 3.2 trillion. The price of ether also fell below $ 1,000, leading it to more than 70 percent this year. The price of bitcoin fell to about $ 17,600 on Saturday, according to data from CryptoCompare.
Smaller creditors also cut or paused withdrawals while Toronto-based crypto platform Voyager signed a deal Friday to borrow more than $ 200 million from trading firm Alameda.
“Today’s action gives Voyager more flexibility to ease current market conditions,” said Stephen Ehrlich, CEO.
“Credit facilities will be used by Voyager only if necessary to protect customers’ assets,” he added.
Ryder expects a further downturn in markets to put more pressure on other creditors and traders.
“If we take off one more leg, it will become quite clear, quite quickly, who just stayed for an expensive life,” he said.
Additional reports by Adam Samson in Milan
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