Bitcoin, the world's biggest cryptocurrency, dropped on
Saturday to as low as $17,592.78, falling below the key $20,000 level for the
first time since December 2020.
It picked up slightly during London trading hours on Monday,
at around $20,510 at 1232 GMT. But it has still lost 55% of its value this year
and 35% this month alone in the cryptocurrency sector's latest meltdown.
Bitcoin's fall follows problems at several major crypto
firms. Further declines, market players said, could have a knock-on effect as
other crypto investors are forced to sell their holdings to meet margin calls
and cover losses.
Crypto hedge fund Three Arrows Capital is exploring options
including the sale of assets and a bailout by another firm, its founders told
the Wall Street Journal in a story published Friday, the same day Asia-focused
crypto lender Babel Finance said it would suspend withdrawals.
"We've likely seen the worst of things in terms of any
singular entity suffering, but most in the industry are braced for more to
come," said Joseph Edwards, head of financial strategy at fund management
firm Solrise Finance.
U.S. based lender Celsius Network this month said it would
suspend customer withdrawals. In a blog on Monday, Celsius said it would
continue working with regulators and officials, but that it would pause its
customer Q&A sessions.
"There is a lot of credit being withdrawn from the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 entire
amount of credit available in the crypto ecosystem is much reduced," said
Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2.
"It feels very like 2008 to me in terms of how there
could be a domino effect of bankruptcies and liquidations," Farthing said.
Smaller tokens, which usually move in tandem with bitcoin,
were also hurt. No.2 token ether was at $1,129, having dipped below its own
symbolic level of $1,000 over the weekend.
The fall in crypto markets has coincided with a slide for
equities, as U.S. stocks suffered their biggest weekly percentage decline in
two years on fears of rising interest rates and the growing likelihood of
recession.
Bitcoin's moves have tended to follow a similar pattern to
other risk assets such as tech stocks.
The overall crypto market capitalisation is roughly $950
billion, according to price site Coinmarketcap, down from a peak of $2.9
trillion in November 2021.
A fall in stablecoins - a type of crypto designed to hold a
steady value - is also suggesting investors are pulling money from the sector
as a whole.
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