July 6, 2022

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Bitcoin drops below $20,000 limit

Bitcoin drops below $20,000 limit

Bitcoin price broke below the key $20,000 threshold for the first time since November 2020, risking triggering a new wave of selling and deepening the crisis sweeping the digital asset sector.

The largest cryptocurrency, which serves as the benchmark for the broader crypto market, fell below $18,000 on Saturday, down nearly 14 percent. That pulled it off the peak of the previous bull run in the cryptocurrency markets in 2017 and erased years of gains for long-term holders.

Later in the day, it rose somewhat to above $19,000 but fell again early Sunday to around $18,200 according to CryptoCompare.

Conventional financial markets were shaken this week after three major central banks, led by the US Federal Reserve, boosted borrowing costs as part of an effort to curb hyperinflation. Global stocks posted their worst week since the darkest days of the pandemic in March 2020 as traders feared the strong action could stymie global growth or even lead to a recession.

The cryptocurrency market has been under particularly severe pressure as the race for returns generated by massive stimulus efforts by central banks and governments at the height of the pandemic turns into the opposite direction.

Investors and executives have been anxiously watching the bitcoin price in recent days, fearing that a dip below $20,000 could lead to a forced liquidation of highly leveraged bets in the markets, further putting pressure on the price and exacerbating a credit crunch already hitting major crypto lenders. and merchants.

Last week Celsius and Babel Financial, a pair of cryptocurrency lenders, Prohibited withdrawals Three Arrows failed to meet lenders’ demands to raise additional funds to cover the strained bets. In the past month, Luna and terra – two symbols popular with cryptocurrency traders seeking very high returns – have collapsed.

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“The dominoes are going down now,” Connor Ryder, an analyst with research and data firm Kaiko, said Friday. “With more dominoes, more bearish price action is likely to come, which will likely snowball with this liquidation.”

Bitcoin has shed more than 70 percent of its value since its peak last fall as investors flee more speculative assets as monetary policy tightens around the world by central banks. The total cryptocurrency market cap has fallen to less than $1 trillion from a peak of $3.2 trillion. The price of Ether also fell below $1,000, taking its declines this year to more than 70 percent.

Smaller lenders have also reduced or paused withdrawals, while Toronto-listed crypto platform Voyager on Friday signed a deal 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.

“Voyager will only use the credit facilities if necessary to protect customer assets,” he added.

Ryder expects further declines in the markets to put more pressure on lenders and other traders.

“If we get another leg,” he said, “it would be very clear, very quickly who was clinging to his dear life.”

Additional reporting by Adam Samson in Milan