June 21, 2022
Bitcoin held above the $20,000 mark on Monday as investors braced for a tough time. On Saturday, the world’s largest cryptocurrency dropped below the $20,000 mark to as low as $17,592.78 for the first time since December 2020.
Crypto experts linked Bitcoin’s decline to the various problems facing several crypto firms. An eventual domino effect could happen if the cryptocurrency continues to fall in value, as other crypto investors will be forced to sell their holdings to meet margin calls and cover losses.
U.S. based lender Celsius Network has already suspended customer withdrawals while crypto-hedge fund Three Arrow Capital considers options such as asset sales and a bailout by another firm.
“There is a lot of credit being withdrawn from the system, and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books, which means that the entire amount of credit available in the crypto ecosystem is much reduced. It feels very like 2008 to me in terms of how there could be a domino effect of bankruptcies and liquidations,” said Adam Farthing, chief risk officer for Japan at crypto liquidity provider B2C2.
The sources for this piece include an article in Reuters.
