On Monday, bitcoin fell below $24,000 for the first time since December 2020, as investors dumped crypto amid a broader sell-off in risk markets. Meanwhile, a crypto loan company named Celsius has put a halt on its customers’ withdrawals, raising worries of a market-wide meltdown.
Bitcoin’s Fall and Crypto Market Response
According to CoinDesk data, the world’s largest cryptocurrency, bitcoin, fell below $24,000 and was trading around $23,325 at 10 a.m. on Wall Street, a 15% loss.
Over the weekend and into Monday morning, the whole cryptocurrency market had lost more than $200 billion. According to CoinMarketCap data, the cryptocurrency market cap dipped below $1 trillion for the first time since February 2021 on Monday. Is this still Crypto Winter?
With rampant inflation continuing and the US Federal Reserve anticipated to raise interest rates this week to contain rising prices, macro issues are contributing to bearishness in the crypto markets.
The Nasdaq, which is heavily weighted in technology, fell dramatically last week. Bitcoin and other cryptocurrencies have a history of being linked to equities and other risky assets. When these indices decline, so does crypto.
“Since November 2021, sentiment has changed drastically given the Fed rate hikes and inflation management.” We’re also potentially looking at a recession given the FED may need to finally tackle the demand side to manage inflation. “All this points to the market not having bottomed and unless the Fed is able to take a breather, we’re probably not going to see bullishness return.“
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told interviewers in a media interview.
According to Ayyar, Bitcoin has plummeted roughly 80% from its previous record high in previous bear markets. It is currently down roughly 63 percent from its previous all-time high in November.
Celsius Halts Crypto Withdrawals
Since mid-May, when the so-called algorithmic stable coin terraUSD, or UST, and its sister cryptocurrency luna crashed, the crypto market has been on edge.
The market is now concerned about a crypto loan firm named Celsius, which said on Monday that it is halting all withdrawals, swaps, and account transfers “due to extreme market conditions.”
Celsius, which claims to have 1.7 million customers, advertises to its customers that the platform may provide an 18% yield. Celsius is where users deposit their cryptocurrency. After that, the crypto is leased to institutions and other investors. As a result of the revenue earned by Celsius, users receive a yield.
However, the cryptocurrency market downturn has harmed Celsius. According to the company’s website, it had $11.8 billion in assets as of May 17, down from more than $26 billion in October of the previous year.
According to CoinGecko, CEL, Celsius’ coin, has dropped more than 50% in the last 24 hours. Investors are afraid of broader crypto market contagion.
“The Celsius situation is adding fuel to the fire,” Ayyar said.
Broadly, the markets were already under pressure from inflation concerns and interest rate hikes, but with crypto, such contagion events could cause outsized declines, given the market is tightly interlinked these days with a variety of inter-connected protocols and businesses.”
After all, the market might still be in crypto winter.
