Bitcoin price falls below $20,000 for the first time since 2020
These issues include trading platform Coinbase laying off 18% of its staff, crypto bank Celsius saying it was suspending withdrawals, challenges from a hedge fund known as Three Arrows Capital (3AC), a decline broader stock market and a move by the Fed this week to raise interest rates in an attempt to slow soaring inflation.
This all follows the collapse last month of Terra’s stablecoin and related coin, luna, which precipitated a plunge.
The voices of crypto-skeptics are getting louder
Bitcoin’s decline is important not only as an indicator, but also because it tends to trigger further selling in the market – investors lose confidence and want to stem losses as the coins they hold lose the value. The price of ethereum, another popular cryptocurrency, fell below $1,000 on Saturday for the first time since January 2021, following a similar decline to bitcoin. Ethereum lost more than 10% of its value in the last day and 40% in the last week.
Bitcoin price was as low as $6,000 at the end of March 2020, at the start of the pandemic, before a rally began. More and more people have discovered the sector and interest in digital investing has grown with people stuck at home and looking for outlets to spend time and money. Stimulus checks also likely helped push prices higher for the same reasons.
Last November, bitcoin had surpassed $61,000. But it has been falling steadily ever since, with experts saying the decline is likely to continue in the near term.
“With rising rates, we will actually see yield decline in the crypto space across all assets,” Haohan Xu, chief executive of crypto firm Apifiny, wrote in a note, echoing skepticism from many. actors and analysts.
The hike — the Fed raised interest rates by three-quarters of a percentage point on Wednesday, the highest jump in 28 years — has had a big impact on crypto, given how many investors in the sector rely on loans. “Borrowing has been very important for anyone participating in the crypto market,” Xu wrote.
The crypto world is also highly interdependent, with investment firms often holding positions in each other, magnifying the effect of a downturn. 3AC, which many crypto start-ups rely on for their investments, took a hit because it invested hundreds of millions of dollars in luna.
This is not the first prize roller coaster for bitcoin. In 2018, a sell-off known as “crypto winter” caused the price to plummet from $14,000 at the start of the year to just under $3,000 at the end of the year. It fetched $9,000 in February 2020 before taking off during the pandemic.
Expert predictions of where bitcoin will bottom out this time around have been all over the map, in light of economic uncertainty and the lack of long historical patterns.
But many more people are investing in cryptocurrency now than four years ago, when it was largely a niche investment. A Pew study last year found that up to 16% of Americans held cryptocurrency at some point.