Daily Mail
The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above its key $20,000 resistance level, with investors fearing problems at major crypto players could spark further market shakeout.
Bitcoin, the world’s most popular cryptocurrency, dropped Saturday to a low not seen in a year and a half – $17,592.78 – falling below the key $20,000 marker for the first time since December 2020.
The drastic drop, spurred by high inflation and upcoming rate hikes from the Fed, saw other smaller tokens that usually move in tandem with the coin, such as Ethereum, fall to similar lows – spurring experts to warn of an impending crisis.
Ethereum, the No.2 cryptocurrency, was trading at $1,129, after having dipped well below its own symbolic level of $1,000 over the weekend, to $879.80.
The numbers represent a stark fall from grace for the coins from late last year, when they reached record highs – with Bitcoin hitting $69,000 and Ethereum surpassing $4,900.
The coins have since seen their value fall drastically, as experts warn of an impending ‘domino effect of bankruptcies and liquidations’ as the industry enters a bear market.
‘We’ve likely seen the worst of things in terms of any singular entity suffering, but most in the industry are braced for more to come,’ Joseph Edwards, head of financial strategy at fund management firm Solrise Finance, said of the looming crisis.
The coins’ spectacular crash spurred crypto lenders such as Celsius, Binance, Three Arrows and Babel Finance to suspend withdrawals, after the drop spurred a sell off that likely left the firms see much of their evaluations – comprised of others’ money – evaporate.
Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2, says the situation has him concerned that apart from a bear market, the mass withdrawals could spell doom for the industry as a whole, as firms try to deal with the losses.
‘There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the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
Farthing further warned: ‘It feels very like 2008 to me, in terms of how there could be a domino effect of bankruptcies and liquidations.’
US based lender Celsius Network announced it would suspend customer withdrawals earlier this month, after drops in May saw Bitcoin and Etheruem fall below previous resistance levels of $40,000 and $3,000, respectively.
A resistance level refers to price point where buyers are less inclined to buy coins – on their way down – or more inclined to sell them – on their way up – due to them reaching a marker where those who bought it at an earlier price feel pressured enough to sell.
The resistance markers met over the weekend were proceeded by sell offs seen during the week, causing Bitcoin to lose 20 percent of its value from last Monday, and more than half of its value from the beginning of the year.
Other currencies have had even more dramatic tumbles – with Ethereum down by more than 70 percent in the same period.
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…
