The price of bitcoin has fallen below the key threshold of $ 20,000 for the first time since November 2020, risking triggering a new wave of sales and deepening the crisis that has gripped the digital assets sector.
The largest cryptocurrency, which serves as a benchmark for the wider crypto market, fell below $ 18,000 on Saturday, down about 14 percent, before returning slightly. This brought it below the peak of the previous bull race in the crypto markets in 2017 and erased years of gains for long-term owners.
Traditional financial markets were shaken this week after three major central banks, led by the US Federal Reserve, increased borrowing costs as part of efforts to curb intense inflation. Global stocks announced their worst week since the darkest days of the pandemic in March 2020, because traders feared that aggressive action could slow global growth or even cause a recession.
The cryptocurrency market has suffered particularly acute pressure as the return race spurred by huge stimulus efforts by central banks and the government reversed abruptly at the height of the pandemic.
Investors and executives have been anxiously watching the price of bitcoin in recent days, fearing a drop below $ 20,000 could trigger forced liquidations of large financial leverage bets in markets, creating greater price pressures and exacerbating the credit crunch that has already hit major crypto lenders and traders.
Last week, Celsius and Babel Financial, a pair of crypto lending companies, blocked withdrawals while Three Arrows failed to meet lenders ’demands to raise additional funds to cover spoiled bets. Last month, Luna and Terra – two tokens that were popular with crypto traders looking for ultra-high yields – failed.
“Dominoes are falling now,” Conor Ryder, an analyst at Kaiko Research and Data, said Friday. “With more dominoes probably comes more action to reduce prices, which is likely to experience a snowball with these liquidations.”
Bitcoin has lost more than 70 percent of its value since its peak last fall as investors fled fugitive speculative assets due to tightening monetary policy around the world by central banks. The total market value of cryptocurrencies fell below $ 1 trillion from a peak of $ 3.2 trillion. The price of ether also fell below $ 1,000, so it fell more than 70 percent this year. The price of bitcoin fell to about $ 17,600 at one point on Saturday, according to data from CryptoCompare, before recovering to just under $ 20,000.
Smaller lenders also cut or paused payments, while crypto platform Voyager in Toronto on Friday signed a loan agreement for more than $ 200 million from trading firm Alameda.
“Today’s actions give Voyager more flexibility to ease current market conditions,” said Stephen Ehrlich, CEO.
“Voyager will only use credit opportunities if necessary to protect clients’ assets,” he added.
Ryder expects further market declines to put more pressure on other lenders and retailers.
“If we knock down another leg, it will become pretty clear, pretty quickly who just kept alive,” he said.
Additional reporting by Adam Samson in Milan