The cryptocurrency world is experiencing what can only be described as a meltdown, with prices plummeting today to lows not seen since the end of 2020.
The plunge is likely due to several factors including general economic uncertainty as seen in the stock market, inflation, bearish conditions and loss of confidence in crypto-coins, and scared money and bots being spooked by whales selling.
It definitely did not help that crypto-lending biz Celsius Network put a freeze on withdrawals, swaps, and transfers Sunday night. Soon after Bitcoin tumbled 10 percent, Ethereum lost 19 percent of its value, and fan-favorite Dogecoin shed nearly 15 percent of its value, or about $0.01, since then.
Celsius is a peer-to-peer lending network in which customers deposit cryptocurrencies that are then loaned to others. Interest paid on loans is split between Celsius and lenders, reportedly at up to 18.6 percent APY with weekly payouts.
Celsius froze activity citing “extreme market conditions,” which is arguably fair. Prices have been sliding since November, when Bitcoin was at an all-time high above $60,000. Since then, China has banned (for the umpteenth time) cryptocurrencies, US dollar-backed stablecoins have wobbled and prices have continued to drop.
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Data from CoinMarketCap shows that the total value of the crypto market has dropped 14 percent in the past day, falling to less than $1 trillion for the first time in over a year. In that same period it peaked at more than $3 trillion.
Celsius had been facing accusations it lacked liquidity, and on Friday its own token, CEL, dropped 20 percent in value days after the company said it was operating at “full speed ahead” with “more than enough ETH to meet obligations.” Its Sunday message started a selloff that may (or may not) have even triggered crypto trading site Binance to freeze Bitcoin trading, which it said was done due to a “stuck transaction.”
Inflation isn’t helping
The “extreme market conditions” Celsius referred to in its note were already driving Bitcoin down at the end of last week. On Friday morning the top cryptocurrency was at roughly $30,000; by Sunday morning it had dropped to $27.5k, and right now it’s at about $23,000.
Much of that movement is attributable to inflation data released Friday, which topped expectations to reach a 40-year high. Fears of additional interest rate hikes
Cryptocurrencies, as much as they have tried to market themselves as being resistant to inflation, haven’t lived up to that lofty ambition. Friday’s news was a direct cause, said crypto platform Luno’s VP of corporate development Vijay Ayyar, who said this might not be the bottom.
“If one looks at previous bear markets, Bitcoin has declined around 80%-plus normally, with altcoins typically doing 90%-plus. If that remains the case, we could see much lower Bitcoin prices over the next month or two,” Ayar told Bloomberg. ®