The cryptocurrency market has seen a widespread sell-off, with BTC falling to its lowest level in about 18 months after credit platform Celsius froze customer withdrawals, adding to fears that systemic risk across the ecosystem will accelerate the collapse of the digital asset market, Bloomberg wrote.
The world’s most significant digital token, BTC, fell 17 percent to $22,603, its lowest level since December 2020. Other cryptocurrencies also failed, and the MVIS CryptoCompare Digital Assets 100 index, which measures the top 100 tokens, fell by 17%.
According to CoinGecko, the total market value of digital assets, which surpassed $3 trillion in November, fell below $1 trillion during trading on the New York Stock Exchange on Monday.
“The fundamentals to support stabilization and recovery just aren’t there,” said Stephen McClurg, co-founder, and CIO of cryptocurrency fund manager Valkyrie Investments. – Things could get worse before they improve again.”
Shares of cryptocurrency-related companies also fell: MicroStrategy Inc., a software company, buying BTC as part of its corporate strategy, fell 25%. Block Inc. is down 13%. Bitcoin miners Marathon Digital Holdings Inc. and Riot Blockchain Inc. fell 12% and 10%, respectively.
Binance, the largest cryptocurrency trading platform, temporarily suspended withdrawals from its BTC network due to transaction processing problems but later resumed operations.
The main reason for the fall in cryptocurrencies, which are risky assets, is traders’ bet on a tighter pace of interest rate hikes by the Federal Reserve after data on Friday showed that U.S. inflation jumped to a new 40-year high in May. Adding to that was the collapse of the Terra/Luna ecosystem last month and the suspension of withdrawals by lender Celsius on Monday morning.
According to Rick Bensignor, president of Bensignor Investment Strategies and former strategist at Morgan Stanley (NYSE: M.S.), “If you do open long positions, you might want to consider doing so with a long call spread or a short put spread to limit your risk on bitcoin futures: if it falls, there is no reliable support.”
Traders suggested that Celsius could face further risks if the sell-off in the cryptocurrency market deepens. A loan of more than $278 million, one of the largest single loans on the decentralized lending platform MakerDAO, has been labeled as a loan made by Celsius. So should BTC fall below $22,534.89, that position would be liquidated, intensifying the bitcoin sell-off.