Bitcoin’s price has broken below the $ 20,000 key threshold for the first time since November 2020, and risks triggering a new wave of sales and exacerbating the crisis gripping the digital asset sector.
The largest cryptocurrency, which serves as a benchmark for the broader cryptocurrency market, plunged below $ 18,000 on Saturday, a fall of around 14 percent, before bouncing back slightly. It took it below the peak level for the previous bull run in crypto markets in 2017 and erased years of gains for long-term owners.
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 curb intense inflation. Global equities posted their worst week since the darkest days of the March 2020 pandemic when traders worried that the aggressive action could stifle global growth or even trigger a recession.
The crypto market has been under particular acute pressure as the race for returns prompted by the massive stimulus efforts from central banks and governments at the height of the pandemic abruptly shifts in reverse.
Investors and executives have been anxiously watching the price of bitcoin in recent days, fearing that a fall below $ 20,000 could lead to the forced liquidation of large mortgaged games in the markets, put more pressure on the price and exacerbate the credit crunch that has already hit large cryptocurrencies . and traders.
In the last week, Celsius and Babel Financial, a couple of crypto loan companies, blocked withdrawals while Three Arrows failed to meet lenders’ demands to raise extra funds to cover acidified games. Last month, luna and terra collapsed – two tokens that were popular among crypto traders seeking ultra-high returns.
“Dominoes are falling now,” said Conor Ryder, an analyst at analytics and data provider Kaiko on Friday. “With more dominoes, there will probably be more price declines, which will probably see a snowball with these liquidations.”
Bitcoin has lost more than 70 percent of its value since its peak last fall as investors flee more speculative assets with the tightening of monetary policy around the world by central banks. Total crypto market value has fallen below $ 1tn from a peak of $ 3.2tn. The price of ether has also fallen to less than 1000 dollars, which takes the decline this year to more than 70 percent. The Bitcoin price fell to around $ 17,600 on Saturday, according to data from CryptoCompare.
Smaller lenders have also reduced or stopped withdrawals, while the Toronto-listed crypto platform Voyager on Friday entered into an agreement to borrow more than $ 200 million from the trading company Alameda.
“Today’s actions give Voyager more flexibility to curb current market conditions,” said Stephen Ehrlich, CEO.
“The credit facilities will only be used by Voyager if necessary to secure customers’ assets,” he added.
Ryder expects the further fall in the markets to put more pressure on other lenders and traders.
“If we get a leg down, it’s going to be pretty clear, pretty quickly, who just hung on for life,” he said.
Further reporting by Adam Samson in Milan