Crypto Industry Is Plagued With Anxiety As Bitcoin Looms Near Key $20,000 Level

Crypto Industry Is Plagued With Anxiety As Bitcoin Looms Near Key $20,000 Level

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HONG KONG, June 20 (Reuters) – The cryptocurrency industry was on edge on Monday morning as investors feared the contagion of problems from major crypto players could trigger a major crisis if not contained.

Bitcoin, which has lost 57% so far this year and 37% this month, fell below $20,000 over the weekend for the first time since December 2020. The level has symbolic significance , as it was around the peak of the 2017 cycle.

The price plunge follows struggles faced by several major players in the industry, while further declines could have a ripple effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.

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Crypto hedge fund Three Arrows Capital is exploring its options, including asset sales and a bailout by another firm, its founders told the Wall Street Journal in a Friday post, the same day as crypto-focused lender Babel Finance. on Asia, announced that it would suspend withdrawals. Read more

Earlier this month, US lender Celsius Network announced it would suspend withdrawals, and many of the industry’s recent issues can be traced to the dramatic collapse of the so-called stablecoin TerraUSD in May. Read more

Bitcoin was trading either side of $20,000 on Monday, while token No. 2 Ether was at $1,075, after falling below its own token level of $1,000 over the weekend. end.

“If the market goes up, everyone breathes a sigh of relief, things will get refinanced, people will increase equity and all risk will go away. But if we go much lower, I think it could be total crap,” said Adam Farthing, head of Japan risk office at crypto liquidity provider B2C2.

“There is a lot of credit taken out of the system and if lenders have to absorb the losses from Celsius and Three Arrows they will reduce the size of their future lending books, meaning the total amount of credit available in the ecosystem crypto is reduced a lot.

“It feels a lot like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” Farthing said.

To be sure, developments in crypto have coincided with a plunge in equities, with US equities suffering their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of a recession.

The price of bitcoin has tended to move roughly similar to other risky assets such as tech stocks.

Smaller cryptocurrencies were hit even harder than major tokens, as investors sought the comparative security of bitcoin and stablecoins whose values ​​are pegged to those of traditional assets, most often the US dollar.

The overall crypto market cap is around $870 billion, according to pricing site Coinmarketcap, up from a peak of $2.9 trillion in November 2021. read more

However, even stablecoin market caps have fallen in recent months, suggesting that investors are making money from the sector as a whole. Read more

Tether, the world’s largest stablecoin, saw its market capitalization drop to around $68 billion on Monday from over $83 billion in early May.

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Reporting by Alun John Montage by Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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