HomeBusinessCrypto industry fears contagion as bitcoin slips below $20,000

Crypto industry fears contagion as bitcoin slips below $20,000

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustrative image, February 14, 2018. REUTERS/Dado Ruvic/File Photo

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LONDON/HONG KONG, June 20 (Reuters) – The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above a key level as investors feared problems for major players in the crypto does trigger a broader market upheaval.

Bitcoin, the world’s largest cryptocurrency, was trading just below the symbolic $20,000 level at the start of trading hours in London – around the peak of its load from its previous all-time high in 2017.

Bitcoin had fallen to $17,592.78 on Saturday, falling below $20,000 for the first time since December 2020. It has lost nearly 60% of its value this year and 37% this month alone in the last collapse of the cryptocurrency sector.

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Its fall follows problems at several major players in the industry. Market participants say further declines could have a ripple effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.

Crypto hedge fund Three Arrows Capital is exploring options such as asset sales and a bailout by another firm, its founders told The Wall Street Journal in an article published Friday, the same day as crypto-focused lender Babel Finance. Asia, announced that it would suspend withdrawals. Read more [nL4N2Y42I2]

US lender Celsius Network announced this month that it would suspend customer withdrawals. In a blog post on Monday, Celsius said it would continue to work with regulators and officials, but would pause its Q&A sessions with customers. Read more

“There is a lot of credit taken out of the system and if lenders have to absorb the losses from Celsius and Three Arrows, they will reduce the size of their future lending books, which means the total amount of credit available in the ecosystem crypto is reduced a lot,” said Adam Farthing, Director of Japan Risk Office at crypto liquidity provider B2C2.

“It feels a lot like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.

Smaller tokens, which typically move in tandem with bitcoin, were also affected. Ether token No. 2 was at $1,0752, having fallen below its own token level of $1,000 over the weekend.

The fall in crypto markets coincided with a fall in equities, with US equities suffering their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession.

Bitcoin’s movements have tended to follow a similar pattern to other risky assets such as tech stocks.

The overall crypto market capitalization is around $877 billion, according to pricing site Coinmarketcap, from a peak of $2.9 trillion in November 2021. read more

A decline in stablecoins — a type of crypto designed to hold stable value — also suggests investors are taking money from the sector as a whole. Read more

Bitcoin so far in 2022
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Reporting by Alun John, editing by Shri Navaratnam and Ed Osmond

Our standards: The Thomson Reuters Trust Principles.

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