Bitcoin Drops Below $23,000 In Crypto Crash?

Bitcoin Crash Below $23,000 - Why Crypto Crash Today?

Bitcoin Drops Below $23,000 In Crypto Crash?

Bitcoin and other cryptocurrencies fell sharply as investors dumped risky assets. A crypto lending company called Celsius is temporarily halting withdrawals for its customers, raising fears of a contagion to the broader market.

Bitcoin fell below $23,000 on Monday, hitting its lowest level since December 2020, as investors dump cryptocurrencies amid a massive sell-off in risky assets.

Meanwhile, a cryptocurrency lender called Celsius has temporarily suspended withdrawals for its clients, raising fears of a contagion to the broader market.

The world's largest cryptocurrency bitcoin has fallen below $23,000, according to CoinDesk data. At one point, Bitcoin fell about 17% to trade around $22,764. Some of these losses were later recovered, around 4 p.m. On Wall Street, Bitcoin settled at $23,351 with a 15% loss.

Over the weekend and into Monday morning, more than $200 billion was wiped out from the entire cryptocurrency market. The cryptocurrency market cap fell below $1 trillion on Monday for the first time since February 2021, according to data from CoinMarketCap.

Macro factors are contributing to the downside in cryptocurrency markets, with rampant inflation continuing and the US Federal Reserve expected to raise interest rates this week to control price hikes.

Last week, US indices sold off heavily, with the tech Nasdaq dropping sharply. Bitcoin and other cryptocurrencies tend to correlate with stocks and other risky assets. When these indicators go down, the coding goes down as well.

Since November 2021, sentiment has changed drastically in light of the Federal Reserve raising interest rates and managing inflation. We can also potentially be looking at a recession as the Fed may finally need to tackle the demand side to manage inflation.”

"All of this suggests that the market hasn't quite bottomed out and unless the Fed is able to take a break, we probably won't see the bullish trend return."

Ayyar noted that in previous bear markets, bitcoin is down about 80% from its most recent record high. Currently, it is down about 63% from its all-time high set in November.

“We could see much lower prices for bitcoin over the next month or two,” Ayyar said.

Celsius "adds fuel to the fire"
The cryptocurrency market has also been on alert since mid-May when the so-called stable algorithm terraUSD, or UST, and its sister coin Luna, collapsed.

Now, the market is concerned about a crypto lender called Celsius, which said on Monday it is temporarily halting all withdrawals, swaps and transfers between accounts “due to harsh market conditions.”

Celsius, which claims to have 1.7 million customers, announces to its users that they can get an 18% return through the platform. Users deposit their cryptocurrency using a percentage. This cryptocurrency is then loaned to institutions and other investors. Users then get revenue as a result of revenue generated by Celsius.

But the massive sell-off in the cryptocurrency market has hurt the percentage. The company had assets of $11.8 billion on May 17, down from more than $26 billion in October of last year, according to its website.

The rate of CEL, a special percentage coin, has fallen more than 50% in the past 24 hours, according to CoinGecko. Investors are concerned about the spread of contagion in the cryptocurrency market.

"The centile position definitely adds fuel to the fire," Ayyar said.

“On a large scale, the markets were already under pressure from inflation concerns and rising interest rates, but with crypto such contagious events can cause significant declines, given that the market is highly connected these days with a variety of interconnected protocols and companies.”

Michael Morsch, CEO of cryptocurrency hedge fund ARK36, notes that there may be more pain ahead.

"In the medium term, everyone is really preparing for a further decline," he said. “Bear markets have a way of exposing previously hidden vulnerabilities and over-leveraged projects, so it is possible that we will see events such as the dismantling of the Terra ecosystem last month recur.”


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