Bitcoin dropped to around $17,749. Ethereum also dropped to around $897. On Saturday afternoon, sales in the crypto market accelerated. The world’s two most popular cryptocurrencies have fallen more than 35 percent in the past week as both have overcome symbolic price barriers. So, what was behind the depreciation? In our article, we have included various factors that took place this week when the deep collapse took place and that affect prices…
First thing that shocked the market: Celsius
According to experts, the carnage in the crypto market is partly due to pressure from macroeconomic forces, including rising inflation and repeated Fed rate hikes. Due to the bear market, crypto firms are starting to lay off a large number of employees. And some of the most popular names in the industry are facing solvency meltdowns. Firstly, Celsius shocked the market when it announced that all withdrawals, swaps and transfers between accounts were paused due to “extreme market conditions”. In a note to the Celsius community, the platform also said the move was designed to “stabilize liquidity and operations.”
Celsius has effectively locked down $12 billion in crypto assets under management. It has raised concerns about the solvency of the platform. The news made waves in the crypto industry. It reminded me of the LUNA events in May. As we reported on Kriptokoin.com , Celsius was known for providing users with up to 18.63 percent returns on their deposits.
Cryptocurrency companies are reducing their workforce
Investors were weighing Celsius’s decline, and meanwhile, another crypto firm has joined the growing list of companies that are cutting staff to try to boost their profits. Coinbase announced that it is laying off about a fifth of its workforce due to crypto volatility. The company had previously cut spending and even canceled job offers in hopes of stabilizing its business.
Generally, crypto companies are looking for ways to cut costs as investors turn away from the riskiest assets and drive down trading volumes. Crypto.com recently said it will lay off 10 percent of its workforce, as did Gemini.
Microstrategy CEO spoke
On the other hand, MicroStrategy CEO Michael Saylor discussed concerns about his firm, which is betting $4 billion on Bitcoin. MicroStrategy used corporate debt to buy Bitcoin. In March, Saylor decided to take another step towards normalizing Bitcoin-backed finance when it borrowed $205 million using his Bitcoin as collateral. As Bitcoin prices fell this week, investors worried that the company would be asked to place more collateral on its loan, but Saylor said the fears were overblown. He added that the margin loan was well managed. Saylor used the following statements:
We have $5 billion in collateral. We borrowed $200 million. That’s why I don’t tell people to go out and get a highly leveraged loan. What I’m doing is, I think, doing my best to lead the way and normalize the Bitcoin-backed finance industry.
Fed’s aggressive rate hike
Then Wednesday afternoon, the Fed raised benchmark interest rates by three-quarters in its most aggressive hike since 1994. The Fed said the move was made to rein in very high inflation. Crypto prices initially rose as investors hoped we could avoid a recession, but that rally was short-lived.
Bitcoin suffered a Wall Street-induced drop on Thursday
We turned red on Thursday. Bitcoin has dropped to prices it hasn’t seen since the end of 2020. The losses were closely tied to a sell-off on Wall Street, where the Dow fell 700 points to its lowest level in more than a year. It seems that investors can’t shake their recession fears. Some say it may take time for cryptocurrencies to recover from sales in riskier assets.
“I think we’re in a long retreat here,” said Jill Gunter, Espresso Systems co-founder and chief strategy officer. said. In many ways, what we’re seeing is a “healthy cleanse,” Gunter said.
Fears of bankruptcy grip the market
As Bitcoin and Ethereum continue to sell rapidly over the weekend, the carnage in the crypto markets shows no signs of slowing down. This comes as crypto hedge funds and businesses face growing questions about bankruptcy. “We experienced financial instability due to opaque leverage,” said Charles Cascarilla, Paxos CEO and Co-Founder. We couldn’t understand where all these risks were piling up.” said. However, Cascarilla also says that investors are still looking for quality crypto investments.
Meanwhile, it should be noted that the problems experienced in Three Arrows Capital shook the field. Three Arrows was launched in 2012 and has grown to become one of the largest hedge funds in the crypto space, with over $10 billion in assets under management at its peak. However, the crypto market took a hit when it started to decline in 2022. There are rumors that the company is on the verge of bankruptcy.
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