Cryptocurrency investors and executives are preparing for more pain after the price of bitcoin fell over the weekend, exacerbating the credit crunch affecting the industry.
Bitcoin, the world’s most actively traded cryptocurrency, fell to $ 17,628 on Saturday before recovering, according to CryptoCompare data.
Investors and executives have been anxiously watching the price of the token, fearing that a drop below $ 20,000 could lead to the forced liquidation of large leveraged bets.
Bitcoin, which acts as a major benchmark for the broader cryptocurrency market, has come under heavy pressure in recent months as central banks and governments went from a prolonged period of very low interest rates to a fight rising inflation.
“This is a dark winter for crypto, as the era of free money is coming to an end with this weekend another brutal sale at all levels. All risky assets are being thrown out the window said Dan Ives, CEO and senior stock analyst at Wedbush Securities.
The search for yields has changed as large central banks, led by the US Federal Reserve, raise borrowing costs and end pandemic-era efforts to stimulate economic growth.
Traditional financial markets have been shaken this month as traders worried that aggressive action could lead to global growth or even a recession. Last week was the worst for global stocks since the darkest days of the pandemic in March 2020.
Bitcoin has fallen about 70 percent from its all-time high of nearly $ 70,000 last November to just over $ 20,000 on Sunday afternoon, Eastern Time. Ether, another actively traded witness, went down to $ 900 over the weekend, meaning its price has dropped four-fifths from its high at the end of last year.
This has contributed to an escalating credit crunch in the digital asset industry that threatens to engulf many of its key players.
Last month, the so-called stablecoin land and its brother token luna, popular with very high-yielding cryptocurrency traders, collapsed, two lending platforms prevented depositors from withdrawing their assets and the Cryptographic hedge fund Three Arrows was unable to meet margin calls in the wake of lenders’ demands.
The sale over the weekend led to the settlement of more than $ 600 million in leveraged positions, according to Coinglass data, as traders who had borrowed money to accept supercharged market bets issued no further guarantee and were removed.
Analysts expect these losses to put even more pressure on the balance sheets of traders and lenders, as many users took out loans against their holdings in cryptocurrencies.
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However, dogecoin, the “joke” cryptocurrency, rose after Elon Musk, chief executive of electric car maker Tesla, posted a tweet of his continued support for the witness.
El Salvador president and bitcoin champion Nayib Bukele told investors on Sunday to “stop looking at the chart and enjoy life.” Bukele, who led the adoption of bitcoin as a legal tender last year, has rejected IMF warnings about the policy.
Cryptographic market problems have re-emerged in the corners of the main financial market. MicroStrategy, a technology group that is a major investor in bitcoins, listed in the United States, has fallen nearly 70 percent this year. Shares of cryptocurrencies, which earn commissions to validate cryptographic transactions, have also fallen sharply.
Cryptographic exchanges (platforms that sit directly on the teeth of the relentless fall of the market) have been forced to reverse their hiring plans. The list includes Coinbase, Gemini, Mercado Bitcoin, a popular exchange in South America, and rival lender Celsius BlockFi, which reduced its workforce by 20 percent this month.
Additional report by Adam Samson in Milan