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Bitcoin, the world's biggest cryptocurrency, was trading just
under the symbolic level of $20,000 in early London trading
hours - roughly the peak of its charge to its previous record in
2017.
Bitcoin had dropped on Saturday to as low as $17,592.78, falling
below $20,000 for the first time since December 2020. It has
lost almost 60% of its value this year and 37% this month alone
in the cryptocurrency sector's latest meltdown.
Its fall follows problems at several major industry players.
Further declines, market players said, could have a knock-on
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
including the sale of assets and a bailout by another firm, its
founders told the Wall Street Journal in a story published
Friday, the same day Asia-focused crypto lender Babel Finance
said it would suspend withdrawals.[nL4N2Y42I2]
U.S. based lender Celsius Network this month said it would
suspend customer withdrawals. In a blog on Monday https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998,
Celsius said it would continue working with regulators and
officials, but that it would pause its customer Q&A sessions.
"There is a lot of credit being withdrawn from the system and if
lenders have to absorb losses from Celsius and Three Arrows,
they will reduce the size of their future loan books which means
that the entire amount of credit available in the crypto
ecosystem is much reduced," said Adam Farthing, chief risk
office for Japan at crypto liquidity provider B2C2.
"It feels very like 2008 to me in terms of how there could be a
domino effect of bankruptcies and liquidations," Farthing said.
Smaller tokens, which usually move in tandem with bitcoin, were
also hurt. No.2 token ether was at $1,0752, having dipped below
its own symbolic level of $1,000 over the weekend.
The fall in crypto markets has coincided with a slide for
equities, as U.S. stocks suffered their biggest weekly
percentage decline in two years on fears of rising interest
rates and the growing likelihood of recession. [MKTS/GLOB]
Bitcoin's moves have tended to follow a similar pattern to other
risk assets such as tech stocks.
The overall crypto market capitalisation is roughly $877
billion, according to price site Coinmarketcap, down from a peak
of $2.9 trillion in November 2021.
A fall in stablecoins - a type of crypto designed to hold a
steady value - is also suggesting investors are pulling money
from the sector as a whole.
Graphic: Bitcoin so far in 2022 -
https://fingfx.thomsonreuters.com/
gfx/mkt/lgvdwbwqapo/Bitcoin%20so%20far%20in%202022.png
(Reporting by Alun John, Editing by Shri Navaratnam and Ed
Osmond)
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