Thursday was another bitter day on the crypto markets as Bitcoin fell below the $19,000 mark. This followed the news that a big crypto hedge fund, Three Arrows Capital, had gone into liquidation. All of which has raised concerns that the ‘crypto winter’ could be extending into a crypto summer.
It was a day that saw Bitcoin lose 4% of its value compared to just 24 hours prior, and the world’s biggest crypto has fallen over 70% compared to its all-time high of the nearly $69,000 that it was trading at in November 2021.
The whole of the cryptocurrency sector has been rocking since the collapse of the Terra stablecoin earlier this year, and this has caused something of a liquidity crisis among several leading crypto firms.
Highly leveraged firms are common in the cryptocurrency industry and it seems that Three Arrows Capital could be the latest victim. Reports indicate that Three Arrows Capital had large investments in the now-collapsed stablecoin Terra and its sister-coin, Luna. Plus the crypto hedge fund reportedly failed to pay back funds to BlockFi in order to avoid losses made on bad trades.
Such gloomy news extended elsewhere in the crypto realm with the cryptocurrency exchange Coinflex temporarily pausing withdrawals for customers. The exchange said that this was due to extreme market conditions and even announced plans to issue a new kind of coin to make up a $47 million shortfall caused by a customer who failed to pay a debit. The lending firm Celsius also suspended withdrawal facilities as it waited for the market conditions to return to normal.
The fall in Bitcoin’s value is mirroring the uncertainty that is spreading across the economy about continued inflation and the potential for further interest rate hikes. In fact, the dreaded ‘recession’ word has now been heard, not only in the US, but in other countries around the world.
This comes at a time where the S&P 500 is expected to suffer its worst first-half of a year since 1970. Much will depend on how the US Treasury continues with its interest rate hikes. Such moves have been made in a bid to counter the skyrocketing inflation rates in the overheating economy. However, just this week, the boss of Wells Fargo said that he thought the US economy still wasn’t ready for further interest rate hikes.
Despite this, there remain glimmers of hope that the crypto markets can bounce back from what’s been a very difficult year so far. Just this week, Coinbase announced its intentions to get licenses in Europe as it aims to expand beyond the US market.
This move has been made in a bid to keep up with rival brands such as Binance and Crypto.com that have made significant gains in expanding outside of the US. However, with Coinbase also laying off 18% of its workforce earlier this month, it shows how uncertain the current times are.