Bitcoin fell below $20,000 for the first time since late 2020 in a fresh sign that the selloff in cryptocurrencies is deepening. The price of the most popular cryptocurrency had plunged more than 13%– to a low of $17,593– at one point on Saturday, according to the cryptocurrency news site CoinDesk. This the weakest level of the most popular cryptocurrency since December 2020 – before pulling back up to $18,556, still down 9.22%.
Bitcoin has now lost more than 70% of its value since reaching its peak. In 2021, Bitcoin peaked at more than $68,000.
Ethereum, another widely followed cryptocurrency that has been sliding in recent weeks, took a similar tumble Saturday. Ethereum-backed ether is down 74%. Ether breached $1,000 and dropped almost 19% to $891, the lowest since January 2021. The two bellwethers of the crypto market are both down more than 70% from all-time highs set in early November.
The overall market value of cryptocurrency assets has fallen from $3 trillion to less than $1 trillion, according to coinmarketcap.com, which tracks crypto prices. As of Sunday morning the company’s data showed crypto’s global market value stood at about $840 billion.
Reasons why cryptocurrency market has crashed
Broader signs of stress emerged with last month’s collapse of the Terra blockchain, and worsened this week following crypto lender Celsius Network Ltd.’s recent decision to halt withdrawals.
Adding to the mood, crypto hedge fund Three Arrows Capital suffered large losses and said it was considering asset sales or a bailout, while another lender, Babel Finance, followed in Celsius’s footsteps this week.
Bitcoin has been pummeled this week after cryptocurrency lending company Celsius froze withdrawals and transfers between accounts, while crypto companies started laying off employees.
Coinbase announced it had laid off about 18% of its workforce, with CEO and cofounder Brian Armstrong placing some of the blame on a coming “crypto winter.” Besides, companies such as Global Inc, Gemini and BlockFi said they would lay off thousands of employees as investors ditch risky assets. There also were reports that a cryptocurrency hedge fund had run into trouble.
The developments have coincided with an equities slide, as US stocks suffered their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of recession.
Investors are selling off riskier assets because central banks are raising interest rates to combat quickening inflation. Higher rates can help bring down inflation, but they also heighten the chances of a recession by increasing borrowing costs for consumers and businesses and pushing down prices for stocks, and other investments like cryptocurrencies.
Crypto market crash: What experts predict?
Jeffrey Gundlach, CEO of DoubleLine Capital, said he would not be surprised if bitcoin fell to $10,000.
David Gerard, a crypto critic and author of “Attack of the 50 Foot Blockchain,” said the recent meltdowns show a failure by regulators, who he believes should have put more scrutiny on the industry years ago.
Many nascent investors — especially young people — invested based on a false hope that was sold to them, he said: “There are real human victims here that are ordinary people.
Alex Diaz, the administrator of a Facebook group for Bitcoin enthusiasts, said he believes the bitcoin crash is not the fault of bitcoin but of parallel developments in the cryptocurrency space, some of which are “just schemes or outright scams.”
“What it will take to recover is just time,” Diaz said.