Beware! Crypto Industry Is On The Edge After Bitcoin Price Drops

JAKARTA - The cryptocurrency industry was on edge on Monday, June 20 as bitcoin held just above USD 20.000 (IDR 295.7 million). Many investors are concerned that problems with major crypto players could unleash wider market shocks.

Bitcoin, the world's largest cryptocurrency, fell on Saturday to $17.592.78, falling below the key $20.000 level for the first time since December 2020.

It increased slightly during London trading hours on Monday, around 20,510 US dollars by 1232 GMT. But it still lost 55% of its value this year and 35% this month alone in the latest crisis of the cryptocurrency sector.

Bitcoin's fall followed problems at several other major crypto companies. Further declines, market participants say, could have a knock-on effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.

Crypto hedge fund Three Arrows Capital is exploring options including asset sales and bailouts by other companies. Its founder told the Wall Street Journal in a story published Friday, the same day Asia-focused crypto lender Babel Finance said it would suspend withdrawals.

"We may have seen the worst in terms of single entity suffering, but most of the industry is bracing for more to come," said Joseph Edwards, chief financial strategist at fund management firm Solrise Finance.

US-based lender Celsius Network this month said it would suspend customer withdrawals. In a blog on Monday, Celsius said it would continue to work with regulators and officials, but would halt its customer question-and-answer sessions.

“There is a lot of credit being pulled from the system and if lenders have to bear the losses from Celsius and Three Arrows, they will reduce the size of their future loan book which means that the entire amount of credit available in the crypto ecosystem is much less,” said Adam Farthing, head of risk office for Japan at crypto liquidity provider B2C2, was quoted as saying by Reuters.

"It feels like 2008 to me in terms of how there could be a domino effect of bankruptcy and liquidation," Farthing said.

Smaller tokens, which usually move along with bitcoin, are also at a disadvantage. The No.2 ether token is at USD 1.129 (IDR 16.6 million), after dropping below its own symbolic level of USD 1.000 (IDR 14.5 million) over the weekend.

The crypto market crash coincided with a downturn for equities, as US stocks suffered their biggest weekly percentage drop in two years amid fears of rising interest rates and the possibility of a growing recession.

Bitcoin moves tend to follow a similar pattern to other riskier assets such as technology stocks.

The overall crypto market cap is roughly $950 billion, according to pricing website Coinmarketcap, down from a peak of $2.9 trillion in November 2021.

The decline in stablecoins – a type of cryptocurrency designed to maintain a stable value – also suggests investors are pulling money away from the sector as a whole.