Bitcoin’s price has plummeted below the $20,000 key threshold for the first time since November 2020, risking triggering a new wave of selling and deepening the crisis gripping the digital asset sector.
The largest cryptocurrency, which acts as a benchmark for the cryptocurrency market in general, dropped below $19,000 on Saturday morning, a 9% drop. This took it below the all-time highs in the cryptocurrency markets in 2017 and wiped out years of gains for long-term holders.
Traditional financial markets have been rocked this week after a trio of major central banks, led by the US Federal Reserve, raised borrowing costs as part of an effort to curb strong inflation.
Global equities recorded their worst week since the darkest days of the pandemic in March 2020, with traders fearing the aggressive move could derail global growth or even trigger a recession.
The cryptocurrency market has come under particularly acute pressure as the race for returns driven by massive stimulus efforts by central banks and governments at the height of the pandemic abruptly pulls back.
Investors and executives have been anxiously watching the price of bitcoin in recent days, fearing that a dip below $20,000 could lead to forced liquidations of large leveraged bets in the markets, putting pressure on the price and exacerbating the credit crunch that has already hit major lenders. of cryptocurrencies and traders.
In the last week, two cryptocurrency lending companies, Celsius and Babel Financial, have blocked withdrawals, while Three Arrows has failed to meet demands from lenders to shell out extra funds to cover bets that have gone sour. Last month, luna and terra — two tokens that were popular with cryptocurrency traders seeking ultra-high yields — collapsed.
“The dominoes are falling now,” Conor Ryder, an analyst at research and data provider Kaiko, said Friday. “With more dominoes will likely come more action to lower prices, which will likely snowball in these sales.”
Bitcoin has lost more than 70% of its value since its peak last fall as investors flee more speculative assets as central banks tighten monetary policy around the world. The total cryptocurrency market cap has dropped below $1 trillion from a peak of $3.2 trillion. The price of ether has also dropped below $1,000, taking its declines this year to more than 70%. Bitcoin price dropped to around $18,900 on Saturday, according to data from CryptoCompare.
Smaller lenders also scaled back or paused withdrawals, while Toronto-listed cryptocurrency platform Voyager on Friday struck a deal to borrow more than $200 million from trading company Alameda.
“Today’s measures give Voyager more flexibility to mitigate current market conditions,” said its chief executive, Stephen Ehrlich.
“The lines of credit will only be used by Voyager if necessary to safeguard customer assets,” he added.
Ryder expects the further decline in markets to put more pressure on other lenders and traders.
“If we have another fall, it will become very clear, very quickly, who was just rooting for their own life,” he said.
*Collaborated with Adam Samson, in Milan
Translated by Luiz Roberto M. Gonçalves
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