On Tuesday, Bitcoin steadied after it had hit a low of 18 months earlier, as the volatile asset class was shaken up by the announcement of Celsius to halt withdrawals and the possibility of sharper interest rate hikes by the US Federal Reserve.
Bitcoin Climbs to Positive Territory
Overnight, the largest cryptocurrency in the world had shed 7.3%, which brought it down to a low of $20,816 that had been last recorded in December 2020. However, the crypto managed to climb back up once again to positive territory and was trading at $22,470 at the end of the day.
On Monday, the pioneer crypto had seen a drop of 15%, which is the sharpest drop recorded in a single day since March 2020. Since the start of the year, Bitcoin has already lost 50% of its value and it has shed more than 20% since Friday. The currency has come down by almost 70% after it reached its all-time high value back in November 2021 of $69,000.
This week, Celsius Network based in New Jersey, announced that it had decided to freeze transfers and withdrawals on its platform because of extreme market conditions. It said that they were taking steps to protect their clients and stabilizing their liquidity. This move, along with the expectations of a bigger increase in the interest rate by the US Federal Reserve due to hot inflation data, pushed the market capitalization of the crypto market below the $1 trillion mark. This had not happened since January 2021.
No Bright Prospects
Most of the experts have taken a very pessimistic stance when it comes to the immediate prospects of bitcoin and the crypto market in general. Analysts said that since the risk sentiment is mostly negative across all markets, things do not look good for the crypto space either. Until the overall risk sentiment shifts, prices are not likely to turn around quickly.
Other companies that are also exposed to the crypto space will have to deal with ramifications because of the slump in bitcoin’s price. Coinbase Global Inc., a publicly listed crypto exchange, announced on Tuesday that it was laying off 18% of its staff for cutting down its costs amidst volatile conditions of the market. This means that about 1,100 jobs will be reduced.
Last month, MicroStrategy Inc., a software firm in the US and a major bitcoin supporter, had said that a drop below $21,000 for Bitcoin would lead to the demand for extra capital. This is because some of its bitcoin holdings have been used to secure a loan. Thus, the company would either have to sell some of its major holdings, or stake more bitcoin.
On Tuesday, both Coinbase and MicroStrategy shed 5.5% in pre-market trading because crypto-related stocks were roiled by the fall in bitcoin’s price. However, by afternoon trading, the companies had climbed up by 0.27% and 8.11%, respectively. Ether had also lost almost 10% of its value, as it reached a 15-month low of $1,075, but had made some recoveries later.