by Chiara Rossi
Bitcoin is struggling to recover after falling below $20,000 over the weekend for the first time since 2020. Here's what the experts say
Bitcoin, the world's largest cryptocurrency, is struggling to recover earlier this week after falling to new lows in 2022 over the weekend.
Last Saturday, bitcoin hit a low price of $17,592.78. Below the key level of $20,000 touched for the first time since December 2020.
On Monday, the cryptocurrency rose slightly to around $20,510. But it has still lost 55% of its value this year and 35% this month alone in the latest crash in the cryptocurrency industry.
A number of factors have impacted the ecosystem: from the collapse of the TerraUsd stablecoin to the solvency issues of the cryptocurrency lender Celsius. Macroeconomic factors, including high inflation and upcoming rate hikes by the Fed, are also weighing on the market, CNBC points out. And the total value of the cryptocurrency market has fallen below $1 trillion from a peak of $3.2 trillion. Ethereum's price also fell below $1,000, bringing its declines this year to over 70%.
"Now, the analysts explain, it will be a matter of understanding whether Bitcoin will manage not to fall below 20 thousand in the next two or three days: if successful it would reaffirm itself as a support, otherwise it would become an important resistance threshold difficult to cross in a positive way", explains MF.
All the details.
THE COLLAPSE OF BITCOIN
Bitcoin, which serves as a benchmark for the broader cryptocurrency market, fell below $18,000 on Saturday, down about 14%. This brought it below the peak level of the previous bull run in the cryptocurrency markets in 2017 and erased years of gains for long-term holders.
On Monday, the cryptocurrency grew by 10.33% returning to exceed 20 thousand dollars.
If investors appreciate the rebound, bitcoin is still 70% below its all-time high, reached in November, Reuters reports. Rising rates have impacted riskier assets such as cryptocurrencies, contributing to the free fall in the price of Bitcoin.
WHAT'S HAPPENING TO THE INDUSTRY
And the operators of the sector were overwhelmed.
This month the decentralized finance platform Celsius said it would suspend customer withdrawals. In a blog on Monday, Celsius said he would continue to work with regulators and officials, but that he would suspend his clients' sessions.
On Friday, the Wall Street Journal revealed that cryptocurrency hedge fund Three Arrows Capital is exploring options including selling assets and a bailout by another company. On the same day, Babel Finance, another major decentralized finance platform, suspended withdrawals.
A stable drop in Bitcoin below $20,000 could lead to the liquidation of other positions, according to some managers in the sector.
"Growing recession fears are crippling appetite for risky assets and this has caused cryptocurrency traders to remain cautious about buying Bitcoin at these lows," Edoardo Moia, senior market analyst at Oanda, said in a June 16 note.
"We've probably seen the worst of things in terms of a single entity's suffering, but most of the industry is ready to do more," said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.
Many have suggested that a market low may be near, but with so much economic uncertainty left, bitcoin still has greater downside potential, according to Yuya Hasegawa, a cryptocurrency market analyst at Japanese bitcoin exchange Bitbank.
"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 lending books, meaning that the entire amount of credit available in the crypto ecosystem is very small," Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2. "It looks very similar to me in 2008 in terms of how there might be a domino effect of bankruptcies and liquidations," Farthing said.