The price of Bitcoin has fallen below the key $20,000 threshold for the first time since November 2020, risking to trigger a new wave of selling and deepening the crisis hitting the digital asset sector.
The biggest cryptocurrency, which serves as a benchmark for the broader crypto market, plunged below $18,000 on Saturday, a fall of around 14%, before rebounding slightly. This brought it back below the peak level of the previous bull run in the crypto markets in 2017 and erased years of gains for long-term holders.
Traditional financial markets were shaken this week after a trio of major central banks, led by the US Federal Reserve, raised borrowing costs as part of an effort to rein in intense inflation. Global equities recorded their worst week since the darkest days of the pandemic in March 2020, as traders feared the aggressive action could scold global growth or even trigger a recession.
The crypto market has come under particularly acute pressure as the race for yield sparked by massive stimulus efforts by central banks and governments at the height of the pandemic abruptly reverses.
Investors and executives have been eagerly watching the price of bitcoin in recent days, fearing that a drop below $20,000 could lead to forced liquidations of large leveraged bets in the markets, putting increased pressure on the price and worsening the credit crunch that has already hit major crypto lenders. and traders.
Over the past week, Celsius and Babel Financial, a pair of crypto lending firms, blocked withdrawals while Three Arrows failed to respond to requests from lenders to find additional funds to cover soured bets. Last month, luna and terra – two tokens popular with crypto traders looking for ultra-high yields – crashed.
“The dominoes are falling now,” Conor Ryder, an analyst at research and data provider Kaiko, said Friday. “With more dominoes, there is likely more downward price action, which will likely see a snowball with these selloffs.”
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 value of the crypto market fell below $1,000,000,000 after peaking at $3.2,000,000. The price of Ether also fell below $1,000, taking its decline this year to over 70%. The price of Bitcoin fell to around $17,600 at some point on Saturday, according to data from CryptoCompare, before bouncing back to sit at just under $20,000.
Smaller lenders have also reduced or suspended withdrawals, while Toronto-listed crypto platform Voyager signed an agreement on Friday to borrow more than $200 million from trading firm Alameda.
“Today’s actions give Voyager more flexibility to mitigate current market conditions,” Chief Executive Officer Stephen Ehrlich said.
“Credit facilities will only be used by Voyager as necessary to protect customer assets,” he added.
Ryder expects the further decline in markets to put increased pressure on other lenders and traders.
“If we drop another leg, it will become pretty clear, pretty quickly, who hung on for life,” he said.
Additional reporting by Adam Samson in Milan
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