LONDON/HONG KONG: Bitcoin steadied onTuesday after initially falling to a new 18-month low as majorcrypto lender Celsius Network’s freezing of withdrawals and the prospect of sharp U.S. interest rate rises shook the volatileasset class.
Bitcoin clawed its way to positive territoryafter falling as much as 7.3% to $20,816, its lowest since Dec.2020. It was last up 1.1%.
The world’s largest cryptocurrency fell 15% on Monday, itsbiggest one-day drop since March 2020. Bitcoin is down abouthalf this year and over 20% since Friday alone. Since its recordhigh of $69,000 in November, it has slumped nearly 70%.
New Jersey-based Celsius said in a blog poston Monday, citing extreme market conditions, that it had frozen withdrawals and transfers between accounts, “to stabilise liquidity and operations while we take steps to preserve andprotect assets”.
The move, combined with expectations of sharper U.S. Federal Reserve interest rate hikes after high U.S. inflation data last week, pushed the value of the crypto market under $1 trillion for the first time since January 2021.
Most crypto players were pessimistic about bitcoin’s immediate prospects.
“With the broader risk sentiment firmly negative the sellershave had it all their own way for a few days,” said RichardUsher at crypto firm BCB Group. “It will take a shift in theoverall risk sentiment to turn the price around significantly.”
Smaller cryptocurrencies, which tend to track bitcoin’smovements, also recovered sharp losses. No. 2 token etherwas up 2.4% after losing as much as 10% to $1,075, afresh 15-month low.
Celsius, which has around $11.8 billion in assets, offersinterest-bearing products to customers who deposit crypto at its platform. It then lends out coins to earn a return.
“The market is now panicking about the impact and contagionif Celsius becomes insolvent,” wrote Singapore fund manager QCPCapital in a note.
Cryptocurrency investors were already rattled by thecollapse of the terraUSD and luna tokens in May which wasshortly followed by Tether, the world’s largest stablecoin,briefly breaking its 1:1 peg with the dollar.
And higher U.S. inflation has not only roiledcryptocurrencies further but also other asset classes asinvestors dumped risky assets, with the S&P index fallingfor four days straight.
Crypto-linked stocks have been particularly hard hit.Bitcoin-buying software firm MicroStrategy tumbled25.2%, while crypto exchange Coinbase Global lost11.4%.
