Bitcoin has fallen to its lowest level in about 18 months after lending platform Celsius froze withdrawals, adding to the fears that systemic risk in the crypto ecosystem is accelerating the digital asset market crash.
The world’s largest digital token fell 15% to $23,336, its lowest level since December 2020. Other cryptocurrencies also declined as a selloff continued. The MVIS CryptoCompare Digital Assets 100 Index, which measures 100 of the top tokens, fell 15%. And the total market value, which topped $3 trillion in November, was $1.02 trillion as of 9:48 a.m. New York time on Monday.according to CoinGecko.
The selloff comes as traders raise bets for a more aggressive pace of tightening from the Federal Reserve after data on Friday showed US inflation hit a new 40-year high in May. Cryptocurrencies, which have struggled amid Fed policy in recent months, have been particularly hard hit. The collapse of the Terra/Luna ecosystem last month and the suspension of withdrawals by lender Celsius on Monday morning Asian time further eroded confidence in the space.
“If you go long, maybe consider doing it with a long buy spread or a short sell spread to limit risk” in bitcoin futures, said Rick Bensignor, president of Bensignor Investment Strategies and former Morgan Stanley strategist. “If it overwhelms, there is no reliable support nearby”
Break on the Celsius network
Bitcoin’s sharp drop came as crypto lender Celsius Network Ltd. said it was suspending withdrawals, transactions and transfers on its platform.a. Concerns about the sustainability of the high yields offered by the company have surfaced in recent weeks. following the collapse of the stablecoin TerraUSD (UST) which promised returns of up to 20% to depositors.
Cryptocurrency stocks have also been under pressure for months as the prospect of higher interest rates, a possible recession and the collapse of the Terra/Luna ecosystem in May weighed heavily on investor sentiment. The CoinShares Blockchain Global Stock Index, which tracks 49 companies around the world with exposure to cryptocurrencies, has fallen more than 37% so far this year, in pace with its worst annual performance on record.
With risk assets generally lower on Monday morning, the drop in crypto stocks was exasperated by the rapid drop in bitcoin prices.
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