There is panic in the cryptocurrency market. Avoided by investors, Bitcoin continues to lose value. Several companies in the ecosystem seem to be nearing default.
Bitcoin price suddenly dropped below $20,000. Saturday June 18, the queen of cryptocurrencies even for a while collapsed below $18,000, unheard of for 18 months. Bitcoin is still a long way from its November 2021 high above $68,000 and its 2022 high of $48,234.
One detail in particular caused panic among investors: the price again reached a price zone that was below the highest level of the previous bull cycle, which ended in late 2017. That year, Bitcoin flirted with the $20,000 threshold for the first time. By sliding below this threshold, the cryptocurrency realizes: a historic first† Indeed, the price had never fallen below the record of the previous cycle after another upward phase.
Cryptocurrency, Inflation and Traditional Finance
Following King Bitcoin, the entire cryptocurrency market has entered a bearish phase. Ether, whose protocol update is expected in the coming months, dropped below $900. All altcoins went into the red this weekend.
The decline in crypto assets is accompanied by that of traditional finance† After the monetary tightening of the central banks, stock indices are at half mast. The S&P 500 has also lost more than 20% since the beginning of the year. Faced with inflation and the risk of a recession, investors are turning massively away from the riskiest assets, such as cryptocurrencies. Non-fungible tokens (NFTs) are also affected.
For Alkesh Shah, head of digital asset strategy at Bank of America, “Investors continue to position themselves on the defensive”† Asked by the Swiss media, Cyrus Fazel, director of the crypto platform Swissborg, agrees. He points out that there “less money in the market”, that drives investors towards the least risky stocks.
“What we are seeing is more liquidations pushing prices down, leading to more liquidations and negative sentiment. There is still some flushing to be done, but that will run out at some point.”explains Noelle Acheson, market analyst for Genesis company, to Bloomberg.
As seen on the Coinglass website, 85.731 traders liquidated in the last 24 hours ie over $300 million went up in smoke. Bearish moves like these are not uncommon in Bitcoin history. Since its inception, cryptocurrency has often lost up to 80% of its value, destroying newly built fortunes, before starting to rise again a few years later.
Also read: In its early days, bitcoin wasn’t egalitarian or decentralized…and that’s a problem
The First Victims of the Cryptocurrency Crash
The sharp decline in the market has exposed the flaws of the most vulnerable players. This is especially the case with Celsius, a platform that offers to earn interest by depositing cryptocurrencies. Accused of mismanagement of funds, the company is said to be: almost standard† Back to the wall, Celsius made the decision to block withdrawals and transfers.
Users cannot recover their cryptocurrencies. In a blog post published on Monday, June 20, 2022, a week after the lockdown, Celsius warns that withdrawals and transfers will not be reactivated anytime soon.
“We want our community to know that our goal remains to stabilize our liquidity and operations. This process takes time”warns Celsius.
After Celsius all eyes turned to Three Arrows Capital (3AC), an investment fund specializing in cryptocurrencies. Following the liquidation of several positions, the Singapore fund would soon be insolvent. Several platforms, including BitMEX, have confirmed the company’s liquidations. Kyle Davies, the co-founder of 3AC, recently spoke about the difficulties his company has faced in ensuring it is committed to † solve the problems and find a fair solution”.
Let’s also mention the case of BabelFinance, a Hong Kong-based cryptocurrency lender. Next † big fluctuations † of the market, the company admits to complying with “unusual pressure on liquidity”. Babel Finance has announced the indefinite suspension of withdrawals and transfers.
These companies would have lost millions of dollars as a result of: the collapse of the UST, the Terra ecosystem’s stablecoin, in May. Designed to mimic the value of the US dollar, the UST abruptly lost parity last month. The event had blown a wind of panic in the crypto asset world.
Other, stronger players in the ecosystem have also been forced to change course. Reputable exchange platforms, such as Coinbase, Crypto.com or Gemini, have a drastic reduction in their workforce† However, it should be noted that some of the industry’s leading companies, such as FTX, Kraken, and Binance, seem impervious to the vagaries of the market. These companies have indicated that they will continue to recruit new employees. For example, Binance always has: more than 2,000 vacancies in Europe, Asia, South America, Africa and the Middle East.