Bitcoin falls below $ 19K when the crypto fund Three Arrows implodes
Bitcoin fell briefly below $ 19,000 on Thursday, reaching a new low for the year as investors digested the collapse of the cryptocurrency hedge fund Three Arrows and the growing risk of an economic recession.
The leading cryptocurrency was down 4.4% to $ 19,209.20 from 9:30 a.m. Thursday, according to CoinBase data. Bitcoin’s value has fallen nearly 60% so far this year, and more than 70% of its all-time high of $ 69,000 in November last year.
“Bitcoin continues to be under pressure as other assets are. The mix of high inflation, rising interest rates and recession is weighing on cryptocurrencies,” Yves Longchamp, head of research at SEBA Bank, told CNBC regarding the sale.
Other top cryptocurrencies are also struggling. Ethereum fell more than 6% to $ 1032 and solana fell 6% to $ 32.
The recent downturn followed a number of negative developments in a cryptocurrency sector that has already fallen after a month-long sale. Investors have dumped cryptocurrencies and stocks while the Federal Reserve regularly raises interest rates to curb decades of high inflation.
The rapid fall in the price of bitcoin has triggered fears of a liquidity crisis among struggling operators.
Three Arrows Capital, a leading cryptocurrency hedge fund that invested heavily in the doomed luna cryptocurrency before its implosion, went into liquidation after facing legal challenges from creditors over unpaid debt, according to several reports.
“Following defaults, it comes as no surprise that Three Arrows Capital, a cryptocurrency-focused hedge fund, has been ordered to liquidate,” said Edward Moya, an analyst at broker Oanda, in a note to investors. “Concerns are growing that the collapse of Three Arrows Capital could trigger further market contagion.”
In a separate development, CoinFlex, which became the last cryptocurrency exchange to suspend withdrawals last week due to what it described as “extreme market conditions”, revealed that it did not plan to resume transactions on Thursday as originally planned, CNBC reported.
Crypto investors also responded to the latest guidance from Fed Chairman Jerome Powell, who during a panel discussion on Wednesday acknowledged that the central bank was prepared to tolerate a higher risk of recession to bring down inflation.
“Is there a risk that we will go too far? It is definitely a risk, “said Powell. “The biggest mistake to make – let’s put it this way – would be not to restore price stability.”
Cryptocurrencies have been strongly correlated with equities in recent months. Major indices pointed lower in pre-market trading on Thursday, with the Dow Jones Industrial Average futures indicating a loss of more than 300 points.
