Bitcoin (BTC) is falling towards $ 20,000 as crypto-decay continues

Sales of cryptocurrencies deepened further on Wednesday, with bitcoin falling very close to the $ 20,000 key level.

Bitcoin plunged as much as 10% to a low during the day of $ 20,166, according to Coinbase data. It was last traded at $ 21,544.37, down about 2.6%, around 16:24 ET. The world’s largest digital currency has plunged almost 70% since the peak of cryptocurrency in November 2021.

Charlie Morris, founder of digital asset management firm ByteTree, said that $ 20,000 was close to the top of bitcoin’s last major bull run in 2017 and that “may prove to be a support level.”

“With $ 20k, bitcoin has not made money since the height of 2017, but it hides the oversized return over all previous time frames,” he told CNBC.

Digital tokens are in free fall as fears of rising inflation, aggressive interest rate increases and liquidity problems at a key player in the crypto market have plagued the crypto markets.

The Federal Reserve raised interest rates by 75 basis points, as was generally expected. Chairman Jerome Powell also signaled that a new increase of 0.75 percentage points could come next month, if inflation remains high.

Mostafa Al-Mashita, executive vice president of the Canadian crypto company SDM, said that crypto has been captured in the broader “risk-off environment” that affects the markets.

“What we are experiencing is the effect of a worsening macroeconomic trend where inflation is rising due to supply chain problems,” he said.

Earlier this week, crypto lending firm Celsius began blocking users from accessing their money, prompting speculation that the company may soon become insolvent.

Investors are worried that a possible liquidation of Celsius could lead to even more pain for crypto, and potentially knock down other major players.

“If Celsius collapses, there could be a liquid cascade in which whales that have taken advantage of bets on Bitcoin and Ethereum are liquidated,” said Marcus Sotiriou, an analyst at UK digital asset broker GlobalBlock.

Celsius has many assets in the decentralized financial area, including staked ether, a symbol offered by the cryptocurrency startup Lido Finance that is meant to be worth the same as ether, the second largest cryptocurrency.

Deposited ether is essentially an IOU that investors buy to earn rewards on their ether stocks. The original ether is kept locked in the crypto equivalent of a vault, and cannot be reached until the Ethereum blockchain has passed a long-awaited upgrade.

Celsius “may be forced to sell its holdings to satisfy redemptions since the underlying ETH is unlocked with no withdrawal date in sight,” said Marc-Thomas Arjoon, a research fellow at CoinShares, in a note published Monday.

The crypto market was already on shaky ground after the collapse of $ 60 billion of two popular tokens last month. Now key players in the area are preparing for a long-term bear market known as “crypto winter.”

Numerous companies have cut costs dramatically, and Coinbase announced on Tuesday that it would lay off around 1,100 people.

There is now also speculation that Three Arrows Capital, a crypto hedge fund, is on the verge of collapse. Zu Shu, the company’s co-founder, said it was “in the process of communicating with relevant parties and is fully committed to resolving this.”

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