Some observers of digital asset markets criticized the move but others said that Celsius could be protecting user funds; ether plummets 17%.
Investors had their choice of comparatives for describing bitcoin’s deep dive on Monday. The largest cryptocurrency by market capitalization fell to less than a third of its all-time high of nearly $70,000 just eight months ago and less than half of where it perched at the start of 2022.
It was down 16% over the past 24 hours, a rare single-day, double-digit dip, and off over 30% from a month ago when it settled around $30,000 following the collapse of the TerraUSD token. It fell for the seventh consecutive day.
So did cryptos in general, whose combined market cap tumbled below $1 trillion for the first time since early 2021 amid ongoing inflation fears and a torrent of bad news from various protocols, including crypto lending platform Celsius’ announcement that it was pausing withdrawals amid “extreme market conditions.”
Bitcoin was recently trading at about $22,500, down more than 16% over the past day. As for major altcoins, the question wasn’t whether they were in the red but by how much. Ether, the second largest crypto by market cap, was changing hands at roughly $1,200, off over 17% during the same period and its lowest level since January 2021. CRO was off more than 20% at one point amid news that the crypto exchange would pare about 5% of its workforce, roughly 260 jobs. Wrapped bitcoin (WBTC) and TRX were down nearly the same at that time.
Market analysts had a lot to say about the plunge. Little of it offered immediate comfort. “It’s a storm,” 3iQ Digital Asset’s Head of Research Mark Connors told CoinDesk in a phone interview. “Bitcoin bears certainly are in ruckus mode, berating the largest crypto the way a schoolyard bully seeks out for tormenting the same easy mark,” Uphold Financial Consultant Rich Blake wrote.
“Sentiment for cryptos is terrible as the global crypto market cap has fallen below $1 trillion dollars,” Oanda Senior Analyst Edward Moya wrote. “Bitcoin is attempting to form a base, but if price action falls below the $20,000 level, it could get even uglier.
‘’As inflation proves to be an even trickier opponent to beat than expected, Bitcoin and Ether are continuing to get a severe bruising in the ring,” Hargreaves Lansdown Senior Investment and Markets Analyst Susannah Streeter wrote. “They are prime victims of the flight away from risky assets as investors fret about spiralling consumer prices around the world.”
Cryptos’ suffering tracked the hammering of major equity indexes with technology stocks at the forefront of the carnage. The S&P 500 fell 3.8%, re-entering bear market territory – meaning that it has lost 20% of its value from its previous high. The tech-heavy Nasdaq, which hit bear market ground weeks ago, was down a whopping 4.6%, while the Dow Jones Industrial Average was off 2.7%.
Even gold, a traditional safe-haven asset, declined nearly 3%. Investors will be anxiously watching the U.S. central bank’s two-day meeting, which begins Tuesday and is widely expected to culminate with a 50-basis point interest rate hike as part of an ongoing effort to stem stubbornly high inflation. The latest U.S. Consumer Price Index report showed inflation rising 8.6%, a four-decade peek.
3iQ’s Connors noted optimistically that the current crypto spiral was “within the band of growth” relative to other steep drops in crypto’s 13-plus-year history. “I wasn’t around in 2018 for that $20,000 to $3,000 move, but the playing field is much different now as far as the number of people in it (and) the Presidential mandate,” he said. “If you take the band of volatility over the past five years, we’re still within it.”
Connors also said: “The adoption rate the last time we checked both general wallets as well as institutions and mentions in 10Qs are all at elevated levels. The fundamentals are intact.”
Still, the crypto industry has found itself struggling anew Monday with a now less certain future. Lending platform BlockFi said it would slice about 20% of its workforce. Crypto.com and BlockFi’s cuts followed closely after similar announcements by the Winklevoss twins-led exchange Gemini and Middle Eastern crypto-exchange Rain Financial, among others. On Monday, Binance, the world’s largest major crypto exchange by trading volume, paused withdrawals for a brief period.
“As far as support levels, the next few days surely will test digital assets if a faster pace of tightening and more aggressive rate hikes are announced,” Uphold’s Blake wrote. “For the moment, extreme market conditions and fed policy updates are exacerbating the consequences for crypto assets.”