Crypto investors are grappling with aggressive US Federal Reserve rate hikes and a worsening liquidity crisis.
Bloomberg | Bloomberg | Getty Images
Bitcoin dropped below $20,000 on Saturday, marking a relentless drop in cryptocurrencies.
The price of bitcoin fell 9% to $19,217.81 in 24 hours, according to data from Coin Metrics. The last time bitcoin fell below that level was December 2020.
Ether, the second largest token, fell 10% to $997.75, its lowest level since January 2021.
Crypto investors are grappling with aggressive US Federal Reserve rate hikes and a worsening liquidity crisis that has left major players in financial straits.
The Fed hiked interest rates by 75 basis points on Wednesday, the largest increase since 1994. That has led to a pullout from all risky assets, including stocks and cryptocurrencies.
Elsewhere, the crypto space is still reeling from the fallout from the $60 billion collapse of two major tokens last month.
Terra, a so-called stablecoin intended to be worth $1, crashed to a fraction of a cent and took down a corresponding coin called luna. This week, $3 billion cryptocurrency lender Celsius halted withdrawals, leaving users out of money and fears it could become insolvent.
Celsius acts like a bank, taking cryptocurrencies from investors and lending them to institutions to generate returns on deposits. It owns many assets in the so-called decentralized financial space.
Celsius, which says it is “acting in the best interests of our community,” has not returned multiple requests for comment.
Another major player, Three Arrows Capital, is in the midst of its own liquidity crisis. The $10 billion crypto hedge fund is reportedly on the brink of insolvency after the plunge in crypto markets sent the value of its assets plummeting.
3AC was an investor in Terra and has made leveraged bets on numerous tokens, including bitcoin, ether and solana.
Zu Shu, the company’s co-founder, said it was “in the process of communicating with relevant parties and fully committed to working this out”. On Friday, he told The Wall Street Journal that 3AC was considering a sale of assets and a bailout by another company to avoid collapse.
Three Arrows Capital did not respond to a request from CNBC for comment.