The cryptocurrency industry is on edge, as investors feared contagion from problems at major crypto players could unleash a major shakeout. Bitcoin, which has lost 57% so far this year and 37% this month, fell below $20,000 over the weekend for the first time since December 2020.
The level is of symbolic significance, as it was roughly the peak of the 2017 cycle. The price fall follows difficulties at several major industry players. While further declines could have a knock-on effect as it forced other crypto investors to sell their holdings. Particularly to meet margin calls and cover losses.
U.S.-based lender Celsius Network earlier this month said it would suspend withdrawals. Presently, many of the industry’s recent problems trace back to collapse of the so-called stablecoin, TerraUSD in May.
Adam Farthing, Chief Risk Officer for Japan at crypto liquidity provider B2C2, says “If the market goes higher everyone breathes a sigh of relief. Things will get refinanced, people will raise equity, and all the risk will dissipate. But if we move much lower from here, I think it could be a total shitstorm.”
The bitcoin price has moved roughly similar to other risk assets, such as tech stocks.
Smaller cryptocurrencies have been even harder hit than major tokens as investors sought the comparative safety of bitcoin and stablecoins. Whose values they peg to those of traditional assets, most commonly the U.S. dollar.
The overall crypto market capitalization is roughly $870 billion, Which is according to price site Coinmarketcap, down from a peak of $2.9 trillion in November 2021.
However, even stablecoins’ market capitalizations have dropped in recent months, suggesting investors are pulling money from the sector. Tether, the world’s largest stablecoin, has seen its market cap fall to around $68 billion. From over $83 billion in early May.