Bitcoin Prices Plunge Well Below $20,000 Threshold as Cryptocurrency Crash Continues
- By FXT
- June 20, 2022
- FXT Analysis
Prices for the world’s most popular cryptocurrencies have further plunged, as the bear market in digital assets worsened over the weekend.
Bitcoin dropped beneath the key psychological threshold of USD$20,000 over the weekend, tapping a low at one point of $17,677.
The last time Bitcoin tapped this level was over 18 months ago in November 2020. Compared to its peak value of nearly $69,000, Bitcoin has shed more than 70% of its value.
Bitcoin’s prestige cryptocurrency peer Ethereum also posted sharp declines over the weekend, dropping beneath the critical $1,000 barrier to a low of $893, which was last seen in January 2021.
The declines arrive following a bleak year for cryptocurrencies, including a string of upset events for the sector amidst conditions of global economic uncertainty.
These events have most recently included the decision by experimental cryptocurrency bank Celsius Network to put a freeze on withdrawals as a result of “extreme market conditions.”
Celsius Network has around 1.7 million clients, and is considered one of the leading players in the emerging world of decentralised finance.
Last month also saw the collapse of the stable coin Terra, which shed 97% of its value in a period of just 24 hours. Observers have speculated that the plunge was caused by the concerted efforts of Bitcoin short-sellers, who took advantage of Terra to trigger mass sales of the marquee cryptocurrency.
Widespread losses sustained on crypto-assets have since triggered mass retrenchments by companies in the sector, including Blockfi, Coinbase Global Inc, and Gemini, all of whom have announced plans to fire thousands of employees.
2022 has been a hard period across the board for key financial assets, as surging inflation roils major economies, and the war in Ukraine alongside renewed Covid lockdowns in China heighten investor trepidation.
US equities have tumbled since the start of the year as bond yields have risen, putting downwards pressure on fixed income assets. Accelerating rate hikes on the part of the Federal Reserve threatens to tip the the US economy into recession, with other central banks increasingly showing signs that they will follow its hawkish lead.
In this environment of dismal investment options, cryptocurrencies have failed to make good on their long-touted promise of serving as a hedge against inflation, via their intrinsic quality of rigorous scarcity as compared to fiat currencies produced at the discretion of central banks.
Advocates for crypto claim that it is the equivalent of digital gold, serving as a scarce asset whose price will hold steady whenever inflation surges.
Yet amidst the breakneck inflation that has wracked the US and the Eurozone in 2022, cryptocurrencies have instead seen values plunge alongside equities.
Observers say this is a response to central banks such as the Fed implementing rate hikes to contain spiralling price gains. Monetary tightening has caused investors to withdraw from cryptocurrencies, viewing them as a risk asset as opposed to a hedge against inflation.
Leading advocates remain adamant cryptocurrencies are far from dead however, pointing out that during its history Bitcoin has undergone multiple cycles of asymptotic price run-ups followed by sharp crashes.
In 2017, Bitcoin prices steadily mounted to a then-high of $19.783 by December, before suddenly slumping back to four digits by the start of 2018.
There could also be a bright light for the crypto-assets sector in the form of heightened regulation, which would potentially firm up the price of tokens by providing some level of protection to investors and improving transparency.
Binance Australia CEO Leigh Travers said to Cointelegraph last week that “the crypto industry wants to see regulation”. According to Travers the introduction of a prudent regulatory regime would bring higher standards and greater clarity to the market.
As for the current travails of the world’s cryptocurrencies, Travers considers them short-term issues that are driven by by events in the macro-economy.
“Crypto will struggle as so much is macro-driven,” said Travers. “When the fear of higher interest rates is diminished, crypto will catch that wind and make more opportunities when everything has been sold off.”