Bitcoin recovers after plummeting to new 2023 lows building much-needed hope for crypto investors and users.
On Monday, the cryptocurrency market was on edge as bitcoin hovered just above $20,000, and investors were concerned that problems at key crypto exchanges could cause a bigger market downturn.
Bitcoin, the world’s most popular cryptocurrency, fell to $17,592.78, breaking through the $20,000 barrier for the first time since December 2020.
According to Coin Metrics, the world’s largest cryptocurrency by capitalization was last trading 2.1 percent higher at $20,523.08. Bitcoin plummeted to a low of $17,601.58 during the weekend. Meanwhile, the price of ether increased by 1.8 percent to $1,119.99.
While investors will welcome the recovery, bitcoin remains 70% behind its all-time high set in November, and it’s down 57% so far this year. Many have speculated that a market bottom is near. However, Yuya Hasegawa, a crypto market analyst at Japanese bitcoin exchange Bitbank, believes that bitcoin still has more downside potential because of the ongoing economic instability.
In recent weeks, the larger cryptocurrency market has been hit by too many problems, starting with the downfall of algorithmic stablecoin terraUSD and its related token luna.
The spotlight has shifted to cryptocurrency loan organizations offering customers large returns in exchange for depositing their digital currency. Celsius, a corporation with 1.7 million customers and roughly $12 billion in crypto assets under management, halted customer withdrawals last week, raising suspicions that it is bankrupt.
In the midst of the market collapse, cryptocurrency companies have reported rounds of layoffs. Coinbase, a cryptocurrency wallet and exchange announced this week that it will lay off 18 percent of its full-time employees. BlockFi, a lending company, announced that it will lay off a quarter of its employees this week.
The market is also being weighed down by macroeconomic issues such as increasing inflation and impending rate hikes by the U.S. Federal Reserve.
CEO of CryptoCompare told CNBC, “When inflation is on the doorstep, and with rate hikes in the offing, the risks of a recession round the bend are high,” “The push me to pull you of higher rates sapping cash from mortgaged house owners means people are psychologically bracing and paring back and digital assets are suffering thus.
“Coupled with this, the pullback in the digital asset ecosystem has uncovered a number of systemic issues.”
The downturn in crypto markets has coincided with a drop in equities, with U.S. stocks falling by the most weekly percentage in two years on fears of rising interest rates and a higher possibility of a recession.
Bitcoin’s movements have tended to resemble those of other risky assets like tech stocks.
According to the price portal Coinmarketcap, the global crypto market capitalization is under $950 billion, down from a high of $2.9 trillion in November 2021.
A drop in stablecoins, a form of cryptocurrency designed to maintain a constant value, suggests that investors are withdrawing money out of the industry as a whole.
“Now some people are warning that we are still not yet there and that if we were to break significantly lower, that we’d see another wave of liquidations,”
“There’s always that risk hovering there. But my feeling, given I think those very big double-digit rebounds we saw, in bitcoin, particularly in ether, I think to my mind that was a sign that a lot of those really big liquidations are now done and that the base really is being formed.” Director of Bitcoin Suisse, Giles Keating, told CNBC.
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