NEW YORK – Bitcoin fell below the psychologically important $20,000 range on Saturday for the first time since the end of 2020, in a new sign that the selloff in the cryptocurrency is deepening.
According to cryptocurrency news site CoinDesk, the price of the most popular cryptocurrency was down 9.7% on the East Coast as of late afternoon at below $18,600. It was below $18,000 at some point during the day.
According to CoinDesk, the last time bitcoin hit that level was in November 2020, when it hit an all-time high of around $69,000. Many in the industry believed it would never be less than $20,000 again.
Since reaching its peak, bitcoin has now lost over 70% of its value.
Ethereum, another widely-followed cryptocurrency that has been sliding in recent weeks, saw a similar drop on Saturday.
The cryptocurrency industry has seen turmoil amid widespread turmoil in financial markets – this past week was Wall Street’s worst since 2020, in the early days of the coronavirus pandemic.
Investors are selling riskier assets as central banks are increasingly raising interest rates to combat inflation. Higher rates can help reduce inflation, but they also increase the likelihood of a recession by increasing borrowing costs for consumers and businesses, and lowering prices for stocks and other investments such as cryptocurrencies.
The total market cap of cryptocurrency assets has fallen from $3 trillion to less than $1 trillion, according to Coinmarketcap.com, which tracks crypto prices. The company’s data as of Saturday afternoon showed that the crypto had a global market cap of approximately $816 billion.
A period of crypto recession has given rise to urgent calls to regulate the freewheeling industry, with bipartisan legislation to regulate digital assets introduced in the US Senate last week. According to records and interviews, the industry has also stepped up its lobbying efforts by flooding $20 million into the Congressional race for the first time this year.
Cesare Fracassi, a finance professor at the University of Texas at Austin who leads the school’s blockchain initiative, believes bitcoin falling below the psychological threshold is not a big deal. Instead, he said the focus should be on recent news from lending platforms.
One of them, Celsius Network, said this month that it was halting all withdrawals and transfers, with no indication that it would give access to its funds to its 1.7 million customers. Another platform, Babel Finance, said in a notice posted online on Friday that it would suspend redemptions and withdrawals on the products due to “unusual liquidity pressures.”
“There’s a lot of turbulence in the market,” Fracassi said. “And the reason for the drop in prices is because there’s a lot of concern in this area.”
Cryptocurrency exchange platform Coinbase announced on Tuesday that it has laid off nearly 18% of its workforce, with CEO and cofounder Brian Armstrong placing some of the blame on the coming “crypto winter”.
Stablecoin Terra exploded last month, losing tens of billions of dollars in value in a matter of hours.
Crypto entered popular culture much before its recent decline, with Super Bowl ads promoting digital assets and celebrities and YouTube personalities regularly on social media.
David Gerrard, a crypto critic and author of “The 50 Foot Blockchain Attack,” said the recent downturn shows a failure by regulators, which he believes should have done more scrutiny on the industry years ago.
Many nascent investors – especially young ones – invested on the basis of false hope sold to him, saying: “There are real human victims here who are ordinary people.
Alex Diaz, administrator of a Facebook group for bitcoin enthusiasts, said he believes the bitcoin crash is not bitcoin’s fault, but parallel developments in the cryptocurrency space, some of which are “just schemes or outright scams.” “
“It will just take time to recover,” Diaz said.
Chan reported from London. Associated Press journalist Leah Willingham in Charleston, West Virginia contributed to this report.