Crypto industry fears contagion as Bitcoin falls below $20,000

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustrative image dated February 14, 2018. REUTERS/Dado Ruvic/File Photo

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LONDON/HONG KONG, June 20 (Reuters) – The cryptocurrency industry was jittery on Monday as Bitcoin struggled to stay above key levels, and investors feared troubles at major crypto players could trigger a broader market shakeout.

Bitcoin, the world’s largest cryptocurrency, was trading just below the symbolic $20,000 level in early London hours – about the peak of its load from its previous record in 2017.

Bitcoin had fallen as low as $17,592.78 on Saturday, falling below $20,000 for the first time since December 2020. It has lost nearly 60% of its value this year and 37% of its value this month alone in the recent cryptocurrency sector meltdown.

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Its fall follows troubles at several major industry players. Further declines, market participants 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 selling assets and a bailout by another firm, its founders told the Wall Street Journal in a story published on Friday, the same day the Asia-focused crypto lender announced Babel Finance said it would suspend payouts. Continue reading [nL4N2Y42I2]

US-based lender Celsius Network said this month it would suspend customer withdrawals. In a blog Monday, Celsius said it would continue to work with regulators and officials, but that it would pause its Q&A sessions with customers. Continue reading

“A lot of credit is being withdrawn from the system, and as lenders absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books, which means the total amount of credit available in the crypto ecosystem is very reduced,” said Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2.

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

Smaller tokens that typically move with Bitcoin have also been breached. Token Ether #2 traded at $1,0752 after falling below its own symbolic level of $1,000 over the weekend.

The decline in crypto markets coincided with a drop in stocks as US stocks suffered their biggest weekly percentage drop in two years on fears of rising interest rates and the growing likelihood of a recession.

Bitcoin’s moves tended to follow a similar pattern to other risky assets like tech stocks.

The total crypto market cap is around $877 billion, according to pricing site Coinmarketcap, compared to a November 2021 peak of $2.9 trillion. read more

A decline in stablecoins — a type of crypto designed to hold constant value — also suggests that investors are withdrawing money from the sector as a whole. Continue reading

Bitcoin so far in 2022
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Reporting by Alun John, editing by Shri Navaratnam and Ed Osmond

Our standards: The Thomson Reuters Trust Principles.