Bitcoin is stabilizing after heavy losses, but pessimism prevails in the crypto markets

LONDON / WASHINGTON, June 14 (Reuters) – Bitcoin stabilized on Tuesday after previously reaching a new 18-month low, as major cryptocurrency lender Celsius Network’s freeze on withdrawals and the prospect of sharp US rate hikes shook the volatile asset class.

Bitcoin clawed its way into positive territory after as much as 7.3% overnight to $ 20,816, the lowest since December 2020. It was last around $ 22,470.

The world’s largest cryptocurrency fell 15% on Monday, its sharpest one-day fall since March 2020. It has lost about half of its value this year and over 20% since Friday alone. Since the record high of $ 69,000 in November, it has fallen almost 70%.

Referring to “extreme” market conditions, New Jersey-based Celsius said this week that they had frozen withdrawals and transfers between accounts “to stabilize liquidity and operations while we take steps to preserve and protect assets.”

The move, combined with expectations of sharper interest rate hikes from the US Federal Reserve following high US inflation data last week, pushed the value of the crypto market below $ 1 trillion for the first time since January 2021. read more

Most cryptocurrency market watchers were pessimistic about the immediate prospects of bitcoin.

“With the broader risk sentiment that is strongly negative, sellers have had it their own way for a few days,” said Richard Usher of the crypto firm BCB Group. “It will take a shift in overall risk sentiment to turn the price around significantly.”

Bitcoin’s decline is likely to have consequences for other companies exposed to the crypto market.

On Tuesday, the cryptocurrency exchange Coinbase Global Inc (COIN.O) said it would cut 18% of the workforce, or about 1,100 jobs, as part of its efforts to curb costs in volatile market conditions. read more

The US software company MicroStrategy Inc (MSTR.O) – a major supporter of bitcoin – said last month that a fall below $ 21,000 would trigger a claim for additional capital against a loan secured by some of their bitcoin holdings. read more

This could lead to it investing more bitcoin against the loan or triggering the sale of some of its huge holdings. The company did not immediately respond to a request for comment outside of opening hours.

MicroStrategy and Coinbase both fell more than 5.5% in pre-market trading on Tuesday as the decline in bitcoin increased cryptocurrency-related stocks, but was up 8.11% and 0.27% respectively in the afternoon.

No. 2 token ether also recovered somewhat after losing as much as 10% to $ 1,075, a new low of 15 months. Ether is down 75% from a record high of $ 4,869, which was beaten in November.

‘PANIC’

Celsius, which had around $ 11.8 billion in assets, offers interest-bearing products to customers who deposit crypto on their platform. It then lends out coins to make money. read more

“The market is now panicking about the impact and contagion if Celsius becomes insolvent,” Singapore fund manager QCP Capital wrote in a note.

Crypto investors were already rattled by the collapse of the TerraUSD and luna tokens in May, which were soon followed by Tether, the world’s largest stable currency, which briefly broke its 1: 1 affiliation with the dollar. read more

Celsius’ move to suspend withdrawals has raised new questions about regulatory oversight of such crypto-lending platforms.

On Tuesday, the chairman of the US Securities and Exchange Commission, Gary Gensler, told an event that such platforms operated similarly to banks, and asked questions about how they could offer such a large return.

“I warn the public. If it seems too good to be true, it may well be so,” he added. read more

Reporting by Tom Wilson and Elizabeth Howcroft in London, additional reporting by Sujata Rao in London, Alun John in Hong Kong and Katanga Johnson and Hannah Lang in Washington; Edited by Muralikumar Anantharaman, Emelia Sithole-Matarise, Michelle Price, Chizu Nomiyama and Nick Zieminski

Our standards: Thomson Reuters Trust Principles.