The price of bitcoin fell in response to Celsius Network suspending all off-platform trading in response to a liquidity crunch and other market disruptions.
- Bitcoin is down 67% from its all-time high of $69,000.
- Heightened market fears amid rising levels of inflation coupled with failing institutions drive price action.
- Celsius Network has suspended all withdrawals, trades and transfers from its cryptocurrency exchange.
Bitcoin fell below $23,000 today in a new 52-week low during the first hours of trading, representing a 67% drop from the all-time high of $69,000, causing panic on the whole market. What happened?
Earlier this year, Terraform Labs, the startup team behind the Terra ecosystem and the USDT Stablecoin, announced that it would acquire $10 billion worth of bitcoin to back up its stablecoin reserves. This effort quickly failed, and bitcoin was thrown into the market as participants in the Terra ecosystem saw their wealth disappear.
Then last Friday it was reported that the stock market had its worst week this year since January with the Dow down 900 points, leading to a drastic drop in futures over the weekend.
Traditional market fears can easily be attributed to the upcoming Federal Open Market Committee (FOMC) meeting to be held this Wednesday, during which the Federal Reserve is expected to continue raising rates, which ultimately makes pressure on the whole economy as uncontrollable levels of debt become harder to sustain and debt becomes more expensive.
On Sunday, cryptocurrency exchange Celsius Network announced that it would suspend all withdrawals, exchanges and transfers from the platform to “stabilize liquidity and operations”. Celsius had invested much of its holdings in the aforementioned Terra ecosystem and was largely affected by its collapse. Nansen, an on-chain analytics firm, reported an outflow of $420 million in the UST unpeg event as Celsius rushed between May 7-10.
Due to current market conditions, the largest bitcoin-holding company MicroStrategy may soon need to further secure a $205 million bitcoin-backed loan it took out last month. At the time, it was reported that the company could be called on margin if bitcoin fell below $21,000, unless it was to further secure the loan.
A loss of institutional confidence combined with heightened market fears has caused a cascading depletion in market capitalization as financial markets bleed.
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