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Bitcoin, the world’s largest cryptocurrency, traded below the token level of $20,000 in early London trading hours.
On Saturday, Bitcoin plunged as low as $1,7592.78, and fell below $20,000 for the first time since December 2020. It has lost nearly 60% of its value this year and 37% this month alone in the recent crash of the crypto sector.
Its downfall is followed by problems in several major players in the industry. Market players said that further declines could have a spillover effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.
Hedge fund Crypto Three Arrows Capital is exploring options including selling assets and rescuing another company, the fund’s founders told the Wall Street Journal in a story published Friday, the same day that Asia-focused cryptocurrency lender Babel Finance said it was… Withdrawals will be suspended.
Crypto lender Celsius Network said this month that it will suspend customer withdrawals. In a blog post on Monday, Celsius said it will continue to work with regulators and officials, but will pause customer question-and-answer sessions. Selius also said that the stability of liquidity and its operations “will take time”.
“There is a significant amount of credit being taken out of 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 very large,” said Adam Farthing, head of the Japan Risk Office at B2C2 crypto liquidity provider.
“It feels like 2008 to me in terms of how the domino effect of bankruptcy and liquidation is,” Farthing said.
Smaller currencies, which usually move in tandem with bitcoin, were also hit. Ether token number 2 was at $1,0752, after dropping below its token level of $1,000 over the weekend.
The decline in cryptocurrency markets coincided with a decline in stocks, as US stocks suffered their largest weekly percentage decline in two years on fears of higher interest rates and the growing possibility of a recession.
Bitcoin’s movements tend to follow a similar pattern to other risk assets such as technology stocks.
The total market capitalization of cryptocurrencies is around $877 billion, according to pricing website Coinmarketcap, down from a peak of $2.9 trillion in November 2021.
The decline in stablecoins – a type of cryptocurrency designed to maintain a constant value – indicates that investors are withdrawing funds from the sector as a whole.
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