Bitcoin fell again, pushing the token to $20,000. This was evidence that the stress levels in the crypto industry were increasing.
There is a growing concern about the stability and viability of all crypto projects, large and small. Justin Sun, Tron’s founder, has seen USDD, a stablecoin that is roughly a month old, drift from its dollar peg. At one point, it dropped below 96cs, according to CoinGecko data. A tweet by Three Arrows Capital’s co-founder fueled speculation about the fund having suffered significant losses.
Bitcoin dropped 8.6% Wednesday, to $20,081.95. The longest losing streak since 2014 has seen the largest token fall for nine consecutive days. After a 10% plunge, Ether was just a few steps away from breaking the $1,000 barrier.
Markets that began to slide late last year due to expectations of tighter monetary policy are now experiencing widespread panic. This is after the Terra blockchain’s collapse and the recent decision of Celsius Network Ltd., a crypto lender, to stop withdrawals. Glassnode reports that even long-term holders who had avoided selling up until now are falling under increasing pressure.
Mati Greenspan founder of Quantum Economics stated, “What we are seeing now is the weak hands exiting the market as we wash away the excess of what can only be seen in retrospect as an overextended building up of speculation and leverage.”
According to Mike McGlone (an analyst at Bloomberg Intelligence), historical data suggests that Bitcoin could find support for around $20,000 as past selloffs show where it has found points of resilience.
He said that prices could “build a foundation around $20,000, as it did at approximately $5,000 in 2018-19 or $300 in 2014-15,” in a Wednesday note. “Declining volatility is a sign of the maturing digital-store-of-value. Rising prices are another.
On Wednesday, traders were watching closely the developments at Tron DAO Reserve (the entity that oversees cryptocurrency reserves backing USDD), as new apprehensions were triggered. In an apparent effort to combat selling pressure, the group stated Wednesday that it would withdraw 2.5 billion TRX tokens from the Binance crypto exchange. Sun has been promoting USDD’s peg support efforts on Twitter several times this week.
Tron’s governance token TRX has seen short-selling attacks in recent days. It has fallen 14% over the last 24 hours.
Shrinking Crypto Market
The market was further rattled by the vague tweet from Three Arrows Capital founder Zhu Su, a prominent hedge fund that liquidated crypto holdings. Zhu Su, a former trader at Credit Suisse Group AG, tweeted that “We are in communication with relevant parties” and added that he was fully committed to working it out.
Now, the crypto market is only a fraction of what it was in late 2021 when Bitcoin traded at $65,000 and traders invested their cash in speculative investments. According to CoinGecko, the total market cap for cryptocurrencies has fallen from $3 trillion in November to $925 billion.
Prices are continuing to fall, and it is possible that losses could accelerate if key levels don’t hold.
If these levels break, $20k $BTC & $1k $ETH, we can expect massive sell pressure in the spot markets as dealers hedge themselves. We can also expect that there will be some otc dealers and that will be unable to hedge properly and might go belly up.
— Arthur Hayes (@CryptoHayes) June 14, 2022
“If these levels are broken, $20,000 Bitcoin or $1,000 Ether, we should expect huge sell pressure in spot markets as dealers hedge their own,” BitMEX co-founder Arthur Hayes stated in a Tweet.
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