Bitcoin price broke below the key $20,000 threshold for the first time since November 2020, threatening to trigger a new wave of selling and deepen the crisis plaguing the digital asset sector. .
The largest cryptocurrency, which serves as the benchmark for the broader crypto market, dipped below $18,000 on Saturday, down about 14%, before recovering slightly again. That brought it below the peak of the previous bull run in the crypto market in 2017 and erased multi-year gains by long-term holders.
Traditional financial markets were rocked this week after a trio of major central banks, led by the US Federal Reserve, raised borrowing costs as part of efforts to reduce data inflation. bouncing. Global stocks recorded their worst week since the darkest days of the pandemic in March 2020 as traders worried that aggressive action could hurt global growth or even cause recession.
The cryptocurrency market has come under particularly acute pressure as the race for profits fueled by massive stimulus efforts by central banks and governments at the height of the pandemic suddenly turns in the direction of the… opposite.
Investors and executives have anxiously watched bitcoin’s price in recent days, fearing a drop below $20,000 could force the liquidation of heavily leveraged bets in the market, causing added pressure on prices and worsened the credit crunch already befalling major crypto lenders. and merchants.
In the last week, C and Babel Financial, a pair of crypto-lending firms, Withdrawal blocked while Three Arrows failed to respond to requests from lenders to accumulate more money to cover already sour bets. Last month, luna and terra – two tokens popular with crypto traders looking for extreme yields – crashed.
“The dominoes are currently going down,” said Conor Ryder, an analyst at research and data firm Kaiko. “With more dominoes possibly leading to more downward price action, this is likely to see a snowball with these liquidations.”
Bitcoin has shed more than 70% of its value since its peak last fall as investors flee more speculative assets with the tightening of monetary policy worldwide by central banks. . The total crypto market value has dropped below $1 billion from a peak of $3.2 billion. The price of ether has also dipped below $1,000, bringing its drop this year to more than 70%. Bitcoin price fell to around $17,600 at one point on Saturday, according to data from CryptoCompare, before recovering again and hovering just under $20,000.
Smaller lenders have also reduced or halted withdrawals, while Toronto-listed crypto platform Voyager on Friday signed an agreement to borrow more than $200 million from the exchange firm. Alameda.
“Today’s actions give Voyager more flexibility to mitigate current market conditions,” said Stephen Ehrlich, chief executive officer.
“Credit facilities will only be used by Voyager if needed to protect customer assets,” he added.
Ryder expects a further drop in the market to put more pressure on other lenders and traders.
“If we get one more leg down, it becomes pretty clear, pretty quickly who is holding onto dear life,” he said.
Additional reporting by Adam Samson in Milan
