The Crypto Industry Braced for Fallout
Crypto investors and executives are ready for more pain after the price of bitcoin fell over the weekend, aggravating the industry’s financing constraint.
According to CryptoCompare data, Bitcoin, the world’s most actively traded cryptocurrency, dipped as low as $17,628 on Saturday before rebounding.
Investors and officials have been closely monitoring the token’s price; they’re worried that a dip below $20,000 may force the liquidation of massively leveraged bets. Bitcoin, the primary benchmark for the broader cryptocurrency market, has come under intense pressure in recent months as central banks and governments transitioned from an era of ultra-low interest rates to a struggle against rising inflation.
This winter will be dark for cryptocurrency as the period of free money ends, with another painful sell-off across the board this weekend. All risk assets are being tossed out the window. The pursuit of profits has shifted as major central banks, led by the US Federal Reserve, raise borrowing costs and stop pandemic-era measures to spur economic development. Traditional financial markets have been roiled this month; traders worry that the decisive move could stymie global development or perhaps precipitate a recession. Last week was the worst for global equities since the pandemic’s deadliest days in March 2020.
Bitcoin has dropped over 70% from its all-time high of nearly $70,000 last November to less than $20,000. Ether, another regularly traded token, fell as low as $900 over the weekend, marking a four-fifths decrease since its peak late last year.
Crypto Crash Affects Everyone
The weekend’s sell-off caused more than $600 million in leveraged positions to liquidate. Traders who borrowed money to take supercharged market wagers failed to deposit more collateral and wipe out. The problems in the cryptocurrency market have reverberated into the conventional financial industry. MicroStrategy, a US-listed IT company that is a significant bitcoin investor, has dropped nearly 70% this year. Shares in cryptocurrency miners, which earn fees for confirming crypto transactions, have also fallen precipitously.
Crypto exchanges, which are directly in the path of the ongoing market drop, have been forced to cancel recruiting plans. Coinbase, Gemini, Mercado Bitcoin — a popular South American exchange — and Celsius rival lender BlockFi; which lost 20% of its personnel this month, are among those on the list.
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