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Crypto Market Concerned Of Contagion With Bitcoin Falling Below $20,000


Crypto Market Concerned Of Contagion With Bitcoin Falling Below $20,000
On Monday, the cryptocurrency industry was in anxiety as bitcoin fought to hold above a critical level, with investors concerned that issues at prominent crypto companies may spark a larger market shakeout.
In early London trading hours, Bitcoin, the world's largest cryptocurrency, was trading just under the symbolic threshold of $20,000 - around the top of its drive to its last record in 2017.
Bitcoin fell as low as $17,592.78, going below $20,000 for the first time since December 2020.
In the latest cryptocurrency crash, it has lost nearly 60 per cent of its value this year and 37 per cent this month alone.
Its decline is the result of issues at several major industry companies. Further drops, according to market participants, might have a knock-on impact, forcing other crypto investors to sell their holdings to make margin calls and pay losses.
Three Arrows Capital, a crypto hedge fund, is considering selling assets and seeking a bailout from another firm, its founders told the Wall Street Journal in an article published Friday, the same day Asia-focused crypto lender Babel Finance announced it would block withdrawals.
Celsius Network, a lender based in the United States, said this month that it will suspend customer withdrawals. Celsius stated in a blog post on Monday that it would continue to work with regulators and officials, but that it would suspend its consumer 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"There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the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 typically move in line with bitcoin, suffered as well. The second-most valuable cryptocurrency ether was trading at $1,0752, having fallen below its own symbolic mark of $1,000 over the weekend.
The slump in crypto markets has coincided with a decline in equities, with US stocks suffering their largest weekly percentage drop in two years on concerns about rising interest rates and the greater risk of a recession.
Bitcoin's movements have resembled those of other risk assets such as tech stocks.
According to price portal Coinmarketcap, the global crypto market capitalisation is around $877 billion, down from a peak of $2.9 trillion in November 2021.
A drop in stablecoins, a form of cryptocurrency meant to maintain a constant value, suggests that investors are withdrawing funds from the industry as a whole.