The cryptocurrency industry was on edge on Monday as bitcoin held just over $20,000 and investors feared issues by major crypto players could trigger a broader market upheaval.
Bitcoin, the world’s largest cryptocurrency, fell to $17,592.78 on Saturday, falling below the key $20,000 level for the first time since December 2020.
It rose slightly during London trading hours on Monday to around $20,510 at 12:32 GMT. But it still lost 55% of its value this year and 35% this month alone in the latest cryptocurrency sector crash.
Bitcoin’s downfall follows issues at several major crypto firms. Market participants say further declines could have a ripple 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 such as asset sales and a bailout by another firm, its founders told The Wall Street Journal in an article published Friday, the same day as crypto-focused lender Babel Finance. Asia, announced that it would suspend withdrawals.
“We’ve probably seen the worst in terms of suffering for a singular entity, but most players in the industry are bracing for more to come,” said Joseph Edwards, the management company’s chief financial strategist. of Solrise Finance funds.
US lender Celsius Network announced this month that it would suspend customer withdrawals. In a Monday blog https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998, Celsius said it would continue to work with regulators and officials, but would put in place pause his question-and-answer sessions with customers.
“There is a lot of credit taken out of the system and if lenders have to absorb the losses from Celsius and Three Arrows, they will reduce the size of their future lending books, which means that the total amount of credit available in the crypto ecosystem is much reduced,” said Adam Farthing, director of the Japan risk desk at crypto liquidity provider B2C2.
“It feels a lot like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.
Smaller tokens, which typically move in tandem with bitcoin, were also affected. Ether token No. 2 was at $1,129, having fallen below its own token level of $1,000 over the weekend.
The fall in crypto markets coincided with a fall in equities, with US equities suffering their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession.
Bitcoin’s movements have tended to follow a similar pattern to other risky assets such as tech stocks.
The overall crypto market capitalization is around $950 billion, according to pricing site Coinmarketcap, from a high of $2.9 trillion in November 2021.
A fall in stablecoins — a type of crypto designed to hold stable value — also suggests investors are pulling money from the industry as a whole.