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The crypto industry fears contagion when bitcoin falls below $ 20,000

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustration image, February 14, 2018. REUTERS / Dado Ruvic / File Photo

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LONDON / HONG KONG, June 20 (Reuters) – The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above key levels, with investors fearing that problems with major cryptocurrencies could trigger a broader market upheaval.

Bitcoin, the world’s largest cryptocurrency, traded just below the symbolic level of $ 20,000 in early London opening hours – about the top of its cost to its previous record in 2017.

Bitcoin had fallen on Saturday to as low as $ 17,592.78, falling below $ 20,000 for the first time since December 2020. It has lost almost 60% of its value this year and 37% just this month in the cryptocurrency’s latest meltdown.

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The fall follows problems with several major industry players. Further declines, market participants said, could have a spillover effect as other crypto-investors are forced to sell their holdings to meet margin requirements and cover losses.

Crypto hedge fund Three Arrows Capital is exploring options, including selling assets and a rescue package from another company, the founders of the Wall Street Journal said in a story published Friday, the same day that Asia-focused crypto lender Babel Finance said it would suspend withdrawals. read more [nL4N2Y42I2]

The American lender Celsius Network said this month that they would suspend customer withdrawals. In a blog on Monday, Celsius said they would continue to work with regulators and officials, but that they would pause customers’ questions and answers. read more

“A lot of credit is being withdrawn from the system, and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books, which means that the whole amount of credit available in the crypto ecosystem is greatly reduced. “said Adam Farthing, Head of Risk Offices for Japan at B2C2.

“It feels very much like 2008 to me when it comes to how it can be a domino effect of bankruptcies and liquidations,” Farthing said.

Smaller tokens, which usually move with bitcoin, were also damaged. No.2 token ether was at $ 1.0752, after falling below its own symbolic level of $ 1,000 over the weekend.

The fall in the crypto markets has coincided with a fall in equities, as US equities suffered their largest weekly percentage decline in two years due to fears of rising interest rates and an increasing likelihood of recession.

Bitcoin’s moves have tended to follow a similar pattern as other risk assets such as technology stocks.

The total crypto market value is approximately 877 billion dollars, according to the price page Coinmarketcap, down from a peak of 2.9 trillion dollars in November 2021. read more

A fall in stack coins – a cryptotype designed to maintain a steady value – also suggests that investors are withdrawing money from the sector as a whole. read more

Bitcoin so far in 2022
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Reporting by Alun John, editing by Shri Navaratnam and Ed Osmond

Our standards: Thomson Reuters Trust Principles.

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