Bitcoin (BTC), the largest and oldest cryptocurrency in the world, has fallen below $21,000 for the first time since December 2020. This shows that there has been a strong sell-off in the cryptocurrency market pushed by different reasons, including Celsius’ liquidity crisis. There are other things that we should take into consideration as well, including inflation reaching new highs and the response from the U.S. Federal Reserve (FED).
Bitcoin Falls Below $21,000
The price of Bitcoin has reached its lowest point since December 2020, when the virtual currency was entering a bull market that pushed the virtual currency to almost $69,000 per coin. The bear market started when BTC hit $69,000 and it could not recover the value lost.
At that time, it was not possible to think about the end of the bull market as the whole ecosystem was expanding and new products were released on a regular basis. Despite that, 2022 started with a small recovery that helped Bitcoin get closer to $48,000, but then things changed in May when the Terra (LUNA) ecosystem imploded.
Terra was one of the main catalysts of a strong sell-off that pushed the largest virtual currency lower in May 2022. This was one of the first situations that affected the whole crypto market. Let’s not forget that other virtual currencies were also sold, including Bitcoin and Ethereum.
But the most recent situation that affected Bitcoin and the whole crypto space was the crypto lending firm Celcius pausing all account withdrawals. According to CNBCM investors are worried about the company not being able to honour all withdrawal requests. If Celcius collapses, then there could be a contagion effect to other virtual currencies, including the Ethereum ecosystem.
According to the executive director of crypto hedge fund ARK36, Mikkel Morch, in the medium term, everyone is bracing for more downside in the cryptocurrency industry.
“Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month’s unwinding of the Terra ecosystem repeat,” he said.
Another thing that we should take into consideration is related to Tether’s (USDT) FUD. There have been many comments on different forums about USDTs being redeemed and the lack of redemption power from Tether. However, Tether remained pegged to the U.S. dollar and it has many times proved that it is able to sustain stressful situations.
At the time of writing this article, Bitcoin is being traded at close to $21,120. This represents a 30% drop from last week. Other virtual currencies such as Ethereum have lost almost 40% of their value in just 7 days, pushing the market even lower. Other virtual currencies have lost close to 50% of their value as well during the same period of time. Monero, for example, has registered losses that are close to 43% in the last weeks, becoming one of the worst-performing assets among the top 100 digital currencies.