The price of a bitcoin has fallen below $ 20,000 (£ 16,400) amid deepening turmoil in the cryptocurrency market.
Key digital assets fell to levels not seen since December 2020 on Saturday morning, at a time below $ 19,000 before recovering to about $ 19,160, according to CoinDesk.
Bitcoin and other cryptocurrencies have been affected by a number of factors, including rising inflation, which has led to rising interest rates on central banks. This, in turn, has dampened investors’ appetite for riskier assets, such as cryptocurrencies, and hit global stock markets, with the previously high-flying technology sector especially affected.
Last week, central banks in the United Kingdom and the United States raised rates in an attempt to curb rising prices, increasing pressure on digital assets.
Cryptocurrency is the term for a group of digital assets that share the same underlying structure as bitcoin: a publicly available “blockchain” that registers ownership without any central authority in control.
Crypto sponsors have said the industry is a good investment because, for example, it has low rates and, unlike conventional currencies, is not tied to governments. However, his detractors say the lack of regulatory oversight or implicit government support, due to the independent origins of crypto and bitcoin, make him susceptible to scams and savage price fluctuations.
The 24-hour cryptocurrency market is also suffering from internal problems that began with the collapse of Earth, a so-called stable currency whose value was supposed to be tied to the dollar. Its failure in May shook faith in digital assets, sparking a wave of sales that has been exacerbated by broader interest rate movements. The entire crypto market, valued at more than $ 3 million in November last year, is now valued at $ 884 billion according to data firm CoinGecko.
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Investor panic also began to affect financial businesses focused on crypto markets. Last week, Celsius Network, a bank-like business that offered high rates of return on cryptocurrency deposits, halted customer withdrawals. Then Three Arrows Capital, a hedge fund that made expensive bets on the crypto markets, admitted it had problems.
Speaking to the Wall Street Journal on Friday, Three Arrows co-founder Kyle Davies said the company was looking at selling assets or selling to another company.
Some crypto followers consider the $ 20,000 level to be important for several reasons. About half of all bitcoin wallets were priced at just over $ 20,000, according to an analysis by the New York Times at the Columbia Business School in New York Times.
Last week, a cryptocurrency executive told Bloomberg that a drop below $ 20,000 could lead to more sales because some financial companies have borrowed heavily to raise the price of bitcoin, but will have to liquidate their positions, effectively reducing their losses, if the currency falls below $ 20,000.
“There are a lot of funds, big bitcoin borrowers, that have liquidation positions in the $ 20,000 range,” Bobby Lee, chief executive of cryptocurrency storage company Ballet Global, said in an interview with Bloomberg TV.