Crypto update: Bitcoin, Ether bounce off lows after record-breaking rout

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Bit­coin plunged through sev­er­al close­ly watched price lev­els to the low­est since late 2020 as evi­dence of deep­en­ing stress with­in the cryp­to indus­try keeps pil­ing up against a back­drop of mon­e­tary tightening.


The largest dig­i­tal token by mar­ket val­ue tum­bled as much as 15% to $17,599 on Sat­ur­day, mark­ing a record-break­ing 12th con­sec­u­tive dai­ly decline accord­ing to Bloomberg data. It’s still only the biggest drop since Mon­day. The cur­ren­cy recov­ered some of those loss­es and was trad­ing at $19,075 as of 8:30 a.m. in Sin­ga­pore Sunday. 


Ether fell as much as 19% to $881, the low­est since Jan­u­ary 2021, before climb­ing 11% to $1,005 on Sun­day morn­ing in Sin­ga­pore. The two bell­wethers of the cryp­to mar­ket are both down more than 70% from all-time highs set in ear­ly November.


“What we’re see­ing is more liq­ui­da­tions dri­ving prices and sen­ti­ment low­er, which trig­gers more liq­ui­da­tions and neg­a­tive sen­ti­ment — some flush­ing-out need­ed still, but this will at some stage exhaust itself,” said Noelle Ache­son, head of mar­ket insights at Gen­e­sis, one of the largest and best-known lenders in the dig­i­tal-assets space.


Total liq­ui­da­tions in the cryp­to mar­ket were $566.7 mil­lion in the past 24 hours, with Bit­coin and Ether at around $271 mil­lion and $192 mil­lion respec­tive­ly, accord­ing to data from Coinglass.


The lat­est leg down pushed Bit­coin below $19,511, the high the coin hit dur­ing its last bull cycle in 2017, which it reached at the end of that year. Through­out its rough­ly 12-year trad­ing his­to­ry, Bit­coin has nev­er dropped below pre­vi­ous cycle peaks.


Alt­coins were no excep­tion to soured investor appetite in the wake of Bitcoin’s fall, with every token on Bloomberg’s cryp­tocur­ren­cy mon­i­tor trad­ing in the red. Car­dano, Solana, Doge­coin and Polka­dot record­ed falls of between 12% and 14%, while pri­va­cy tokens such as Mon­ero and Zcash lost as much as 16%.


Crypto update: Bitcoin, Ether bounce off lows after record-breaking rout


A tox­ic mix of bad cycles and high­er inter­est rates has been dele­te­ri­ous to riski­er assets like cryp­to. The Fed­er­al Reserve raised its main inter­est rate on June 15 by three-quar­ters of a per­cent­age point — the biggest increase since 1994 — and cen­tral bankers sig­naled they will keep hik­ing aggres­sive­ly this year in the fight to tame inflation.


“Investors are con­tin­u­ing to posi­tion defen­sive­ly fol­low­ing last year’s liq­uid­i­ty-dri­ven dig­i­tal asset bull mar­ket,” Alkesh Shah, head of cryp­to and dig­i­tal assets strat­e­gy at Bank of Amer­i­ca Corp., said in a note on Fri­day. “Although painful, remov­ing the sector’s froth is like­ly healthy as investors shift focus to projects with clear road maps to cash flow and prof­itabil­i­ty ver­sus pure­ly rev­enue growth.”


Broad­er signs of stress emerged with last month’s col­lapse of the Ter­ra blockchain, and wors­ened this week fol­low­ing cryp­to lender Cel­sius Net­work Ltd.’s recent deci­sion to halt withdrawals.


Adding to the mood, cryp­to hedge fund Three Arrows Cap­i­tal suf­fered large loss­es and said it was con­sid­er­ing asset sales or a bailout, while anoth­er lender, Babel Finance, fol­lowed in Celsius’s foot­steps on Fri­day. Even long-term hold­ers who have avoid­ed sell­ing until now are com­ing under pres­sure, accord­ing to researcher Glassnode.


“After Cel­sius, the focus last few days has been Three Arrow Cap­i­tal and Babel Finance.” said Teong Hng, chief exec­u­tive of Hong Kong-based cryp­to invest­ment firm Satori Research. “Su Zhu, the founder of 3AC seems to be miss­ing in action, after pur­port­ed­ly suf­fer­ing huge loss­es due to mas­sive drop in cryp­to this round.”


Sta­ble­coins — a type of cryp­to asset pegged to the val­ue of a fiat cur­ren­cy like the US dol­lar — have also struggled.


The top four sta­ble­coins saw exchange net out­flows last week that were 4.5 times larg­er than the pri­or week, Bank of America’s Shah said, hav­ing chart­ed net out­flows in eight of the 10 pri­or weeks. Sta­ble­coins are often relied upon by cryp­to traders to move funds around the ecosys­tem with­out need­ing to exit into tra­di­tion­al cur­ren­cies, so per­sis­tent out­flows indi­cate that investors remain defen­sive, he added.


Even with the pierc­ing of the key $20,000 lev­el, his­tor­i­cal data show that Bit­coin may find key sup­port around that mark as pre­vi­ous sell­offs demon­strate where the token usu­al­ly finds points of resilience, accord­ing to Mike McGlone, an ana­lyst for Bloomberg Intelligence.


Bit­coin may “build a base around $20,000 as it did at about $5,000 in 2018–19 and $300 in 2014–15,” he said in a note on Wednes­day. “Declin­ing volatil­i­ty and ris­ing prices are ear­marks of the matur­ing dig­i­tal store-of-value.”


Still, the dig­i­tal cur­ren­cy is fast approach­ing its Decem­ber 2020 low of $17,589. It trad­ed as low as $13,222 the pri­or month that year.


The cryp­to mar­ket now stands at a frac­tion of its heights in late 2021, when Bit­coin trad­ed near $69,000 and traders poured cash into spec­u­la­tive invest­ments of all stripes. The total mar­ket cap of was around $881 bil­lion on Sun­day, down from $3 tril­lion in Novem­ber, accord­ing to pric­ing data from CoinGecko. 



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