The price of Bitcoin has fallen below the key $ 20,000 threshold for the first time since November 2020, with the risk of triggering a new wave of sales and deepening the crisis affecting the digital assets sector.
The largest cryptocurrency, which acts as a benchmark for the broader cryptocurrency market, fell below $ 18,000 on Saturday, a 14 percent drop, before recovering slightly. This brought it below the peak of the previous bull run in the crypto markets in 2017 and wiped out years of gains for long-term holders.
Traditional financial markets have been shaken this week after a trio of large central banks, led by the US Federal Reserve, raised borrowing costs as part of an effort to curb sharp inflation. Global stocks had their worst week since the darkest days of the pandemic in March 2020, as traders worried that aggressive action could lead to global growth or even trigger a recession.
The crypto market has come under particularly acute pressure as the race for yields sparked by the massive stimulus efforts of central banks and governments at the height of the pandemic changes sharply 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 leveraged bets in the markets, putting more pressure on the price and worsening the credit crunch that has already affected major cryptocurrency lenders. and merchants.
Last week, Celsius and Babel Financial, a pair of cryptocurrency lending companies, blocked withdrawals while Three Arrows failed to meet lenders’ demands to raise additional funds to cover bitter bets. Last month, Moon and Earth, two tokens that were popular with crypto traders looking for very high returns, collapsed.
“Dominoes are falling now,” Conor Ryder, an analyst at research and data provider Kaiko, said Friday. “With more dominoes, more price action is likely to come down, which is likely to see a snowball with these settlements.”
Bitcoin has lost more than 70 percent of its value since its peak last fall as investors flee the most speculative assets with the tightening of monetary policy around the world by central banks. The total value of the cryptocurrency market has fallen below $ 1 trillion from a high of $ 3.2 trillion. The price of ether has also fallen below $ 1,000, bringing its drop to more than 70 percent this year. The price of Bitcoin fell to about $ 17,600 at one point on Saturday, according to CryptoCompare data, before rebounding to just under $ 20,000.
Smaller lenders have also reduced or halted withdrawals, while Toronto-based cryptocurrency 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,” said Stephen Ehrlich, CEO.
“Credit facilities will only be used by Voyager if necessary to safeguard customers’ assets,” he added.
Ryder expects the new fall in markets to put more pressure on other lenders and traders.
“If we lower another leg, it will be pretty clear, pretty quickly who was just expected for life,” he said.
Additional report by Adam Samson in Milan