Bitcoin, which has lost 57% year to date and 37% this month, fell below $ 20,000 over the weekend for the first time since December 2020. This level has symbolic significance, as it roughly corresponded to the peak of the cycle. of 2017.
The plunge in prices follows struggles in several major industry players, while further declines could have a ripple effect as other cryptocurrency investors are forced to sell their holdings to meet margin calls and cover losses.
Cryptocurrency hedge fund Three Arrows Capital is exploring its options, including asset sale and a bailout by another company, its founders told the Wall Bourse Journal in an article published on Friday, the same day. from cryptocurrency lender Babel. would suspend withdrawals.
US lender Celsius Network said earlier this month that it would suspend withdrawals, and many of the industry’s recent woes date back to the dramatic collapse of the so-called TerraUSD stablecoin in May.
Bitcoin was trading on both sides of $ 20,000 on Monday, while token no. 2, Ether, was at $ 1,075, after falling below its $ 1,000 token level over the weekend.
“If the market goes up, everyone breathes a sigh of relief, things will be refinanced, people will raise their equity and all the risk will go away. But if we go much lower from here, I think it could be a shit storm. total, “said Adam Farthing, head of risk office in Japan at crypto liquidity provider B2C2.
“There is a lot of credit being taken out of the system and if creditors are to absorb the losses of Celsius and Three Arrows they will reduce the size of their future loan books, which means that the total amount of credit available in the crypto ecosystem is very small “.
“It looks a lot like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.
To be sure, developments in cryptocurrencies have coincided with a decline in stocks, as US stocks suffered the largest weekly percentage drop in two years due to fears of rising interest rates and the growing likelihood of a recession. . [MKTS/GLOB]
The price of bitcoin tends to move in much the same way as other risky assets such as tech stocks.
Smaller cryptocurrencies have been hit even harder than major tokens, with investors seeking the comparative safety of bitcoin and stablecoins whose values are pegged to those of traditional assets, most often the US dollar.
The overall cryptocurrency market capitalization is around $ 870 billion, according to listing site Coinmarketcap, down from the $ 2.9 trillion peak reached in November 2021.
However, stablecoin market caps have also declined in recent months, suggesting that investors are taking their money out of the sector as a whole.
Tether, the largest stablecoin in the world, saw its market cap drop to around $ 68 billion from more than $ 83 billion in early May.