Cryptocurrency investors are struggling with aggressive US Federal Reserve interest rate hikes and a worsening liquidity crisis.
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Bitcoin fell below $ 19,000 on Saturday, spreading a sharp drop in cryptocurrencies.
The price of bitcoin fell more than 9% in 24 hours to $ 18,642.22, as of 2 p.m. ET, according to Coin Metrics data. The last time bitcoin traded around this level was in December 2020.
Ether, the second largest witness, fell 10.54% to $ 963.22.
Cryptocurrency investors are facing aggressive US Federal Reserve interest rate hikes and a worsening liquidity crisis that has pushed major players into financial difficulties.
On Wednesday, the Fed raised interest rates by 75 basis points, the largest increase since 1994. This has led to a withdrawal of risky assets from all bands, including stocks and cryptocurrencies.
Elsewhere, the cryptocurrency space is still recovering from the aftermath of the $ 60 billion collapse of two major tokens last month.
Earth, a so-called stable currency that was worth $ 1, crashed to a fraction of a penny, taking an associated currency called the moon.
This week, the $ 3 billion Celsius cryptocurrency lender stopped withdrawals, blocking users of its funds and creating fears that it could face insolvency.
Celsius acts a lot like a bank, taking the crypto of investors and lending it to institutions to generate a return on deposits. It has many assets in the so-called decentralized financial space.
Celsius, who says he is “acting in the best interests of our community,” did not return several comments.
Another key player, Three Arrows Capital, is in the midst of its own liquidity crisis.
The $ 10 billion cryptocurrency hedge fund is reportedly on the verge of insolvency after the collapse of the cryptocurrency markets reduced the value of its holdings.
3AC was an investor on Earth and has placed leveraged bets on numerous chips, such as bitcoin, ether and solana.
Zu Shu, the company’s co-founder, said he was “in the process of communicating with relevant parties and is fully committed to resolving it.”
On Friday, he told The Wall Street Journal that 3AC was considering the sale of assets and a ransom by another company to prevent the collapse.
3AC did not respond to a request for comment from CNBC.
Ryan Shea, an economist at cryptocurrency investment firm Trakx.io, said recent stress on digital assets was “the equivalent of the natural selection cryptocurrency market.”
“In the absence of a central bank, the responsibility lies with the companies that operate in the space of being responsible and those that are not (that is, excessive leverage, poor risk management, poor security, etc.). they will succeed, “Shea said in a statement released Friday. .
“This process is certainly painful, but ultimately the lack of centralized support is a good thing, as it means that moral hazard is avoided because there are no crypto bailouts, unlike the fiat system.”
– CNBC’s Jessica Bursztynsky contributed to this report.