Bitcoin sinks to fresh 18-month low as crypto meltdown deepens

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Bitcoin Sinks To Fresh 18-Month Low As Crypto Meltdown Deepens Bitcoin Sinks To Fresh 18-Month Low As Crypto Meltdown Deepens
The world's largest cryptocurrency fell as much as 7.8 per cent to $20,079.72 (€19,311.52), its lowest since December 2020. Photo: Getty Images
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By Tom Wilson and Gertrude Chavez-Dreyfuss

Bitcoin slumped on Wednesday to a new 18-month low, dragging smaller tokens down with it and deepening a market meltdown sparked by crypto lender Celsius this week freezing customer withdrawals.

The world's largest cryptocurrency fell as much as 7.8 per cent to $20,079.72 (€19,311.52), its lowest since December 2020. It has lost about 33 per cent of its value against the US dollar since Friday, dropping more than 50 per cent since the beginning of the year. It has slumped about 70 per cent from its record high of $69,000 (€66,360) in November.

Bitcoin was last down 3.4 per cent at $21,336 (€20,537).

The digital currency sector has been pummelled this week after US crypto lender Celsius froze withdrawals and transfers between accounts, stoking fears of contagion in markets already shaken by the demise of the terraUSD and luna tokens last month.

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Expectations of a 75 basis-point interest rate hike from the US Federal Reserve later on Wednesday amid blistering inflation have also pressured risky assets from cryptocurrencies to stocks.

Crypto funds saw outflows of $102 million (€98.1 million) last week, according to digital asset manager CoinShares, citing investors' anticipation of tighter central bank policy.

The value of the global crypto market has tumbled 70 per cent to under $900 billion (€865.6 billion) from a peak of $2.97 trillion (€2.86 trillion) in November, CoinMarketCap data shows.

"Some parts of the broader crypto ecosystem are facing a rather harsh reckoning," said Mikkel Morch, executive director at digital asset hedge fund ARK36. "As the reality of the bear market starts to settle in, the hidden leverages and structural weaknesses of projects that only worked when the prices went up are finally brought to light."

Celsius has hired restructuring lawyers and is looking for possible financing options from investors, the Wall Street Journal reported, citing people familiar with the matter. Celsius is also exploring strategic alternatives including a financial restructuring, it said.

Smaller cryptocurrencies, which tend to move in tandem with bitcoin, also fell. Ether, the second-largest token, fell to as low $1,013 (€974.74), the lowest since January 2021, and was last down 8.1 per cent at $1,108 (€1,066.15).

The chaos in the crypto market has spread to other companies, with a number of exchanges slashing workforces.

Major US exchange Coinbase Global Inc said on Tuesday it would cut about 1,100 jobs, or 18 per cent of its workforce. Gemini, another US exchange, said this month it would cut 10% of its workforce.

Still, others are continuing to hire. Binance, the world's largest exchange, said on Wednesday it was hiring for 2,000 positions, and US exchange Kraken said it had 500 roles to fill.

"Hunker down," tweeted Binance chief executive Changpeng Zhao.

Crypto hedge fund Three Arrows, amid social media chatter it is facing liquidation issues, said it was committed to working things out.

US crypto broker Genesis also sought to ease investor concerns on liquidity after what happened to Celsius. Genesis said its balance sheet was strong and its lending business continued to meet client demand despite elevated market volatility.

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