Bitcoin fell to a fresh 18-month low on Wednesday, bringing smaller tokens down with it and worsening a market crisis caused by crypto lender Celsius suspending customer withdrawals earlier this week.
The world’s most valuable cryptocurrency dropped 7.8% to $20,289, its lowest level since December 2020. Since Friday, it has lost roughly 28 percent of its value, and it has lost more than half of its value this year. It has dropped over 70% since reaching a high of $69,000 in November.
The crypto currency sector has taken a beating this week as US crypto lender Celsius suspended withdrawals and account transfers, sparking worries of contagion in markets already spooked by the loss of the terraUSD and luna tokens last month.
Expectations of more aggressive interest rate hikes by the US Federal Reserve as inflation in the world’s largest economy rises have put pressure on riskier assets like cryptocurrencies and stocks.
According to digital asset management CoinShares, crypto funds suffered withdrawals of $102 million last week, owing to investors’ expectations of stricter central bank policy.
According to CoinMarketCap data, the value of the global crypto market has dropped 70% to around $900 billion from a record of $2.97 trillion in November.
“The market’s ripples haven’t ceased yet,” said Scottie Siu, investment director at Axion Global Asset Management in Hong Kong. “Unfortunately, we’re still in the middle of it; the game isn’t over.”
The Wall Street Journal said, citing persons familiar with the situation, that Celsius has retained restructuring lawyers and is searching for new financing options from investors. Celsius is also considering strategic options, including a financial reorganisation, according to the company.
Smaller cryptocurrencies, which usually move in lockstep with bitcoin, also dropped. Ether, the second most valuable cryptocurrency, dropped as much as 12 percent to $1,045, a fresh 15-month low.