LONDON (Reuters) – Bitcoin steadied on Tuesday after earlier hitting a new 18-month low, as major crypto lender Celsius Network’s freezing of withdrawals and the prospect of sharp U.S. interest rate rises shook the volatile asset class.
Bitcoin clawed its way to positive territory after falling as much as 7.3% to $20,816, its lowest since Dec. 2020. It was last up 0.2% at $22,487.
The world’s largest cryptocurrency fell 15% on Monday, its sharpest one-day drop since March 2020. It has shed about half its value this year and over 20% since Friday alone. Since its record high of $69,000 in November, it has slumped nearly 70%.
Citing “extreme” market conditions, New Jersey-based Celsius said on Monday that it had frozen withdrawals and transfers between accounts “to stabilise liquidity and operations while we take steps to preserve and protect assets”.
The move, combined with expectations of sharper U.S. Federal Reserve interest rate hikes after high U.S. inflation data last week, pushed the value of the crypto market under $1 trillion for the first time since January 2021.
Most crypto players were pessimistic on bitcoin’s immediate prospects.
“With the broader risk sentiment firmly negative the sellers have had it all their own way for a few days,” said Richard Usher at crypto firm BCB Group, adding that demand from “medium term investors” was returning. “It will take a shift in the overall risk sentiment to turn the price around significantly.”
Bitcoin’s fall could also see wider consequences.
U.S. software firm MicroStrategy Inc – a major backer of bitcoin – said last month a drop below $21,000 would trigger a demand for extra capital against a loan secured by some of its bitcoin holdings.
That could see it stake more bitcoin against the loan or trigger the sale of some of its vast holdings. The company did not immediately respond to a request for comment outside business hours.
No. 2 token ether also recovered somewhat after losing as much as 10% to $1,075, a fresh 15-month low. Ether is down 75% from its record high of $4,869, hit in November.
GRAPHIC: Bitcoin chart – https://fingfx.thomsonreuters.com/gfx/mkt/myvmnrmbapr/bitcoin%20chart.JPG
“PANIC”
Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit crypto at its platform. It then lends out coins to earn a return.
“The market is now panicking about the impact and contagion if Celsius becomes insolvent,” wrote Singapore fund manager QCP Capital in a note.
Crypto-linked stocks also tumbled, with MicroStrategy plummetting 25%, and crypto exchange Coinbase (NASDAQ:COIN) Global losing 11.4%.
Crypto investors were already rattled by the collapse of the TerraUSD and luna tokens in May which were shortly followed by Tether, the world’s largest stablecoin, briefly breaking its 1:1 peg with the dollar.
Higher U.S. inflation has not only roiled cryptocurrencies further but also other asset classes as investors dumped risky assets, with the S&P index falling for four days straight.
Source: Cryptocurrency - investing.com
