The crypto industry was on the verge of collapse after a fall over the weekend

The crypto industry was on the verge of collapse after a fall over the weekend

Crypto investors and executives are preparing for further pain after the price of bitcoin fell over the weekend, exacerbating the credit crunch affecting the industry.

According to CryptoCompare, bitcoin, the most active cryptocurrency in the world, fell to only $ 17,628 on Saturday before recovering.

Investors and executives are watching the price of the token with concern, fearing that falling below $ 20,000 could cause forced liquidations of large leverage bets.

Bitcoin, which acts as the main benchmark for the wider cryptocurrency market, has come under acute pressure in recent months as central banks and governments have moved from an extended period of ultra-low interest rates to fighting rising inflation.

“This is a dark winter for cryptocurrencies because the era of free money is coming to an end with another brutal sale this weekend. All risky assets are thrown out the window, “said Dan Ives, CEO and senior capital analyst at Vedbush Securities.

The search for yields has shifted as large central banks, led by the US Federal Reserve, increase lending costs and bring to an end pandemic-era efforts to stimulate economic growth.

Traditional financial markets are upset this month as traders worry that aggressive action could threaten global growth or even cause a recession. Last week was the worst for global actions since the darkest days of the pandemic in March 2020.

Bitcoin fell about 70 percent from its record high of nearly $ 70,000 last November to just over $ 20,000 on Sunday afternoon Eastern Time. Ether, another token that is actively traded, fell to as much as $ 900 over the weekend, meaning its price fell four-fifths from its peak late last year.

This has contributed to the escalation of the credit crunch in the digital assets industry, which threatens to affect many of its main actors.

In the last month, the so-called stablecoin terra and its sister token luna – popular with crypto merchants seeking ultra-high yields – have failed, two lending platforms have prevented depositors from withdrawing their assets, and crypto hedge fund Three Arrows has failed to respond. on margin calls due to the lender’s request.

The sell-off over the weekend led to the liquidation of positions worth more than $ 600 million, according to Coinglass, as traders who borrowed money to take bets on an increased market failed to give more collateral and were wiped out.

Analysts expect that these losses will further press the balance sheets of traders and lenders, as many users have taken loans based on their crypto assets.

However, dogecoin, the cryptocurrency “joke”, rose after Elon Musk, CEO of electric car maker Tesla, posted a tweet about his continued support for the token.

Najib Bukele, president of El Salvador and bitcoin champion, told investors on Sunday to “stop looking at the chart and enjoy life”. Bukele, who led El Salvador’s adoption of bitcoin as a legal tender last year, rejected IMF warnings about the policy.

Problems in the crypto market have returned to the corners of the main financial market. MicroStrategy on the US stock market, a technology group that is a major investor in bitcoin, has weakened nearly 70 percent this year. Shares in crypto miners, who earn fees for validating crypto transactions, also fell sharply.

Crypto exchanges – platforms that are directly in the wake of a relentless market downturn – have been forced to reverse employment plans. The list includes Coinbase, Gemini, Mercado Bitcoin – a popular stock exchange in South America – and competing lender for Celsius BlockFi, which laid off 20 percent of its staff this month.

Additional reporting by Adam Samson in Milan

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