Bitcoin price fell below the $21,000 range on Monday night for the first time since December 2020 as investors faced an imminent bearish and reacted to difficulties at a major exchange.
According to data from Coinbase, bitcoin was making a minor rally as of Tuesday morning and was trading near $22,000, but the leading cryptocurrency is still down around 9% over the past 24 hours. The price is down nearly 70% from its all-time high of $69,000 it achieved last November.
According to data from CoinGecko, the sell-off caused the total market capitalization of the cryptocurrency market to drop below $1 trillion. The market was valued at over $3 trillion in November.
Ethereum, the second-largest cryptocurrency, fell more than 5% to $1,182.
The digital asset market experienced volatility this week after the world’s largest cryptocurrency exchange, Binance, temporarily halted bitcoin withdrawals. Binance CEO Changpeng Zhao said the move was a “temporary pause” on “backlogs due to stalled transactions”.
The selloff in the cryptocurrency market has also coincided with the decline in traditional assets over the past several months. Investors have sought to dump their riskier assets, such as cryptocurrencies and high-growth tech stocks, as the Federal Reserve hikes interest rates to calm inflation.
The Fed expects interest rates to rise above normal – potentially as high as 1% – at its meeting this week after a disappointing May Consumer Price Index report rose 8.6% in inflation. Consumer prices have increased at a higher rate since December 1981.
The S&P 500 plunged into a bear market during a major selloff on Monday, with the Dow Jones Industrial Average also falling over 800 points. The tech-heavy Nasdaq index was down 530 points, or 4.7%.
The falling value of cryptocurrencies has already had major consequences for many firms operating in this area.
According to a Bloomberg report, MicroStrategy, a software firm that has heavily bet on bitcoin, faced a potential margin call for more collateral after the price dropped below $21,000.
Coinbase, the largest publicly traded cryptocurrency exchange, revealed on Tuesday that it will lay off 18% of its full-time workforce as part of cost-cutting measures aimed at “crypto winter”. To help cope.
Coinbase CEO Brian Armstrong – who earlier this week urged unhappy workers to leave the company – said the company had expanded its workforce “very quickly” during an era of high growth in the tech sector.
“It looks like we are entering a recession after a 10+ year economic boom. The recession could lead to another cryptocurrency winter and could last longer,” Armstrong said.
Several other crypto firms, including the Winklevoss twins Gemini, Peter Thiel-backed BlockFi and Crypto.com, have also indicated plans to cut jobs in response to the crash.
As The Post reported last month, the drop in cryptocurrency prices has caused panic among retail investors who have put their savings into digital tokens.