The industry of cryptocurrencies was on edge Monday as bitcoin hovered just above $20,000 and investors feared woes at major crypto traders could trigger a broader market shakeout.
The bitcointhe world’s largest cryptocurrency, fell to a low of $17,592.78 on Saturday, below the key $20,000 level for the first time since December 2020.
During London trading hours on Monday, it recovered slightly to around $20,510 at 12:32 GMT. but still has lost 55% of its value this year and 35% this month, in the latest collapse of the cryptocurrency sector.
Bitcoin’s decline follows problems at several major crypto firms. Further declines, market players said, could have a knock-on 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 that include asset sales and a bailout by another firm, its founders told the Wall Street Journal in a story published Friday, the same day as Asia-focused crypto lender Babel. Finance, said it would suspend withdrawals.
We’ve probably seen the worst in terms of suffering from any single entity, but most in the industry are prepared for more,” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.
US lender Celsius Network said this month it would suspend customer withdrawals. In a blog post on Monday, he said he would continue to work with regulators and officials, but would pause question-and-answer sessions from his clients.
“A large amount of credit is being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books, meaning that the total amount of credit available in the crypto ecosystem it’s very small,” said Adam Farthing, head of the risk office for Japan at crypto liquidity provider B2C2.
“It looks a lot like 2008 to me in terms of how there could be a ripple effect of bankruptcies and liquidations,” Farthing said.
Smaller tokens, which typically move alongside bitcoin, were also affected. The ether it was at $1,129, having fallen below its own symbolic level of $1,000 over the weekend.
The slump in crypto markets coincided with a drop in stocks as wall street suffered its biggest weekly percentage slump 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.
