Crypto investors are grappling with aggressive interest rate hikes from the US Federal Reserve and a worsening liquidity crisis.
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Bitcoin fell below $20,000 on Saturday, extending a steep fall in cryptocurrencies.
Bitcoin price fell 9% in 24 hours to $19,217.81, according to data from Coin Metrics. The last time bitcoin fell below this level was in December 2020.
Ether, the second most important token, plunged 10% to $997.75, its lowest level since January 2021.
Crypto investors are grappling with aggressive interest rate hikes from the US Federal Reserve and a deepening liquidity crunch that has pushed major players into financial trouble.
On Wednesday, the Fed raised rates by 75 basis points, its biggest increase since 1994. This led to a pullback from risky assets of all kinds, including stocks and crypto.
Elsewhere, the crypto space is still reeling from the $60 billion meltdowns of two major jets last month.
Terra, a so-called stablecoin that was supposed to be worth $1, crashed to a fraction of a penny, taking with it an associated coin called luna. This week, the $3 billion Celsius crypto lender halted withdrawals, locking users out of their funds and raising fears it could face insolvency.
Celsius acts much like a bank, taking crypto from investors and lending it to institutions to generate a return on deposits. It holds many assets in the so-called decentralized finance space.
Celsius, which says it is “acting in the interest of our community,” did not return multiple requests for comment.
Another key player, Three Arrows Capital, is in the midst of its own liquidity crunch. The $10 billion crypto hedge fund is said to be on the verge of insolvency after falling crypto markets reduced the value of its holdings.
3AC was an investor in Terra and made leveraged bets on many tokens including Bitcoin, Ether, and Solana.
Zu Shu, the company’s co-founder, said it was “communicating with relevant parties and committed to resolving this issue.” On Friday, he told the Wall Street Journal that 3AC was considering asset sales and a bailout by another company to avoid collapse.
Three Arrows Capital did not respond to a CNBC request for comment.