Panic in Crypto Sector as Bitcoin Hangs Near $20,000

The crypto sector was in a panic on Monday. Investors thought problems with major cryptocurrency players could bring real shock if not restrained. Bitcoin, the largest cryptocurrency, lost 57% this year; Also, 37% in June, for the first time since December 2020, fell below the psychological $20,000 mark. This level was the peak of the 2017 cycle. Difficulties will follow the general decline in the value of cryptocurrencies in several significant players in the industry. A subsequent price drop can devastate as other crypto-investors have to sell their property to cover losses.

Three Arrows Capital is exploring its options, including selling assets and assisting another firm. Babel Finance has said it will stop withdrawing. The Celsius Network announced that it would stop withdrawing money as early as last week.

Crypto Crash – Bitcoin Less than $20K?

Bitcoin traded at $20,000 on both sides on Monday. The second token aired was $1,075. However, over the weekend, it fell below its symbolic $1,000. Experts estimate that if the market rises, it breathes a sigh of relief; cases will be re-financed; People will increase capital, and all risks will be dispelled. But it could be a hurricane if it goes too far from here. Many loans are removed from the system, and if lenders have to recoup losses from Celsius and three arrows, they will reduce the size of the future loan. This means that the total amount of credit available in the crypto ecosystem has been dramatically reduced.

This is very similar to 2008 in how the domino effect of bankruptcies and liquidations can be. Of course, the developments in crypto coincided with a decline in shares. U.S. stocks have suffered the most significant weekly percentage drop in two years; Due to rising interest rates and the increasing likelihood of a recession.

The price of Bitcoin tends to move in much the same way as other risky assets such as technology stocks. Smaller cryptocurrencies have suffered even more than significant tokens. Investors sought the relative security of Bitcoin and Stablecoins, whose values are tied to traditional assets, most often the U.S. dollar. The total capitalization of the crypto market is approximately $870 billion; In November 2021, the $2.9 trillion peak dropped.

However, the market capitalization of stablecoins has fallen in recent months, suggesting that investors are taking money entirely from the sector. Tether, the world’s most considerable Stabilcoin capital, has fallen to about $68 billion, From $83 billion in early May.

Fed and Current Waves

Asking investors if things led to this drastic change in market sentiment towards digital assets is quite logical. According to the FTX CEO, the Fed is the main driving force behind the crypto drop. Consequently, the company’s perspective is primarily guided by what the Fed will do. On Thursday, the Fed increased interest rates by three-quarters. This is the largest since 1994. Now tariffs are back to where they were before the COVID pandemic hit in March 2020. The prospect of further growth in interest rates could mean worse news for crypto markets.

Cryptocurrency values fell amid rising consumer prices and interest rates; This proved to be a lousy hedge against general economic conditions. Crypto prices have also fallen with the sinking of stock exchanges, making them less valuable as a means of diversifying portfolios. Low-interest rates and the “easy money” era have pushed investors into more risky games to earn higher returns. This era can end when a recession sets in and interest rates rise.

Negative investor sentiment is putting pressure on the entire cryptocurrency sector. Last week, several crypto projects suspended part of their operations due to liquidity concerns. FTX is currently fighting the bear market better. It is worth noting that cryptocurrencies experienced a slight upswing in weekend trading. Bitcoin returned 7.9% in the previous 24 hours and reached $19,908. Ether rose 12.3% to $1,071 during the same period.

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