Crypto industry on edge as bitcoin slips back below $20,000written by Bella Palmer
Bitcoin has lost almost 60% of its value this year and 37% this month alone in the cryptocurrency sector's latest meltdown
The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above a key level, with investors fearing that problems at major crypto players could unleash a wider market shakeout.
Bitcoin, the world's biggest cryptocurrency, was trading just below the symbolic level of $20,000 in early London trading hours.
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.
Crypto lender Celsius Network this month said it would suspend customer withdrawals. In a blog on Monday, Celsius said it would continue working with regulators and officials, but that it would pause its customer Q&A sessions. Celsius also said that stabilizing its liquidity and operations ‘will take time.’
There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the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.
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