The “bloodbath” of the cryptocurrency industry worsened on Wednesday as bitcoin hit new lows during the year that put the average buyer of the world’s most popular digital asset in the red.
Bitcoin fell below $ 20,000 for the first time since July last year, while ether, the link linked to the Ethereum blockchain, fell to nearly $ 1,000.
The falls mean that Bitcoin has lost 70 percent of its value since last fall’s peak and is now trading below a widely followed market metric known as its “realized price,” the average that buyers pay for coins in circulation.
The falls have deepened the crisis that has gripped digital asset markets in recent months as investors exit high-risk assets and some of the major players struggle to deliver on their promises of overfed returns.
This month, the total value of the largest cryptocurrencies fell below $ 1 million, below a high of $ 3.2 million in November. Investor confidence has eroded as the Terra Network, a popular stable currency, collapsed and the Celsius lending platform prevented its customers from withdrawing funds. Some of the world’s largest exchanges, such as Coinbase and Gemini, have cut thousands of employees to deal with the crisis.
“It’s a bloodbath out there. Grab it. Make sure you can last it,” Changpeng Zhao, CEO of Binance, the largest cryptocurrency exchange, said on Twitter on Wednesday.
Jay Hao, CEO of OKX, warned investors to consider leveraged positions in a volatile market. “Anything can happen. Things can always get worse. Proper risk management is the best way to survive. Be careful.”
Noelle Acheson, head of market intelligence at Genesis Trading, said this week bitcoin fell below its “realized” price (currently about $ 23,038, according to Glassnode) for only the third time in five years. In the other two cases, in November 2018 and March 2020, this indicated that bitcoin was “very close to the market,” he said.
The $ 20,000 level also represents an important threshold for the cryptocurrency because it places the price close to the maximum levels reached during the last major rise in cryptocurrency prices in 2017.
The decline in cryptocurrencies comes amid widespread sales in global financial markets as central banks begin to reduce the economic support that has overfed markets since the Covid-19 pandemic erupted in 2020. The falls have been more painful for highly speculative assets.
“We are in the middle of a sale in global markets, which does not help. There is no desire for risk anywhere, “said Ilan Solot, a partner at Tagus Capital, a cryptocurrency hedge fund.
He warned that falling below $ 20,000 for bitcoins and $ 1,000 for ether could create more dislocations as traders are forced to sell assets to meet demands for more collateral and margin on leveraged transactions. Ether is considered an indicator of investors’ attitudes toward decentralized financial projects, which are often built through the ethereum blockchain.
“The leverage of the system needs to be drastically reduced. This can happen in an orderly or messy way,” Solot said.
On Monday, Celsius, one of the largest cryptocurrency lenders, blocked its customers from withdrawing funds citing “extreme market conditions.” The loan company, which had $ 12 billion in assets in mid-May and claims to have more than 1 million customers, had made risky bets in the defi markets.