Bitcoin, ether and other major coins tumbled on Monday night as the global cryptocurrency market cap fell below the psychologically significant $1 trillion mark to $944.9 billion — a nearly 12.5% drop on the day.
| coin | 24 hours | 7 days | Price |
|---|---|---|---|
| Bitcoin BTC/USD | -15.7% | -28.3% | $22,460.32 |
| ether ETH/USD | -16.4% | -35.1% | $1,204.60 |
| Dogecoins DOGE/USD | -15.65% | -34.5% | $0.05 |
| cryptocurrency | 24-hour % change (+/-) | Price |
|---|---|---|
| phantom (FTM) | +6.25% | $0.24 |
| theta network (THETA) | +5.4% | $1.15 |
| decentralized (MANA) | +4.3% | $0.825 |
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Why it matters: Risk assets were in free fall on Monday, with cryptocurrencies trailing equities, which remained under pressure after the latest round of US inflation data.
The S&P 500 closed in bear territory on Monday and is now 20% below its all-time high of 4,818 set in January. The Nasdaq ended Monday down 4.7% at 10,809.23. Futures for the respective indices were up 0.24% and 0.4%, respectively, at press time.
Investors are eagerly awaiting the next two-day meeting of the Federal Open Market Committee, which is scheduled to begin Tuesday.
There are expectations of the US federal reserve will be more aggressive than expected with rate hikes. Goldman Sachs expects rate hikes of 75 basis points in June and July. Barclays and Jefferies have forecast a 75 basis point hike in June, Reuters reported.
data from the CME group indicates that there is a 90.9% probability that the market expects rate hikes to occur in the 75 basis point range.
On the cryptocurrency side, a drop in liquidity due to tightening is clouding investor sentiment, but digital assets are suffering a double whammy.
Lead Market Analyst at OANDA Edward Moya said, “Sentiment for cryptos is dire as the global crypto market cap fell below $1 trillion. Bitcoin is trying to form a base, but if price action dips below $20,000, things could get even uglier.”
GlobalBlock Analyst Marcus Sotiriou addressed the bankruptcy fears surrounding one of the largest cryptocurrency lending platforms, Celsiusin a note on Monday.
“They were heavily exposed [TerraClassicUSD (USTC)] with around $500 million in customer funds and also lost around $50 million when DeFi protocol Badger DAO was exploited.”
“The biggest problem Celsius has right now seems to be their $1.5 billion position in stETH – 1 stETH is a claim to 1 ETH tied to the Beacon chain. Right now, stETH is trading at a discount of more than 5% to ETH, raising concerns that when clients try to redeem positions, Celsius will run out of cash to repay them,” wrote Sotiriou.
StETH is an ERC20 token representing staked ethers in Lido.
Sotiriou said Celsius is taking “massive borrowing” against its illiquid positions to pay for redemptions from customers but could run out of funds within 5 weeks.
Bitcoin and cryptocurrency investor Lark Davis tweeted that we will start to see “big liquidations” on decentralized finance platforms.
“That could mean hundreds of millions [Ethereum] and [Bitcoin] Market sells into a weak market, driving prices lower.”
We’re getting to the point where we’re going to start seeing some big liquidations on Defi platforms. This could mean hundreds of millions of $eth and $btc markets are sold into a weak market, driving prices lower.
Stay healthy guys!
— Lark Davis (@TheCryptoLark) June 13, 2022
Lead Insights Analyst Will Clemente tweeted that he hadn’t hit rock bottom and said it was a “great time” to allocate heavily with a broad time horizon.
“I have wanted to buy these valuation levels for 2 years and will not be downgrading my targets now that we are here,” Clemente said on Twitter.
Chances are I won’t hit rock bottom, which is fine with me. Probably a great time to allocate a broad time horizon IMO.
I have wanted to buy these valuation levels for 2 years and will not be adjusting my targets downward now that we are here.
— Will Clemente (@WClementeIII) June 13, 2022
Delphi Digital said in a blog on Monday that higher interest rates and tighter financial conditions have not been “historically kind” to bitcoin.
Kevin Kellyan analyst for Delphi Digital wrote, “Bitcoin and the broader crypto market are not isolated from macro risks, particularly those related to global liquidity and financial conditions.”
Bitcoin-dollar performance amid tightening monetary conditions – Courtesy of Delphi Digital
“History suggests that it is not interest rate hikes that are adverse to BTC, but rather tighter liquidity conditions and heightened market volatility coupled with strong risk aversion,” Kelly wrote.
Read Next: Here’s what Bitcoin’s crash could mean for Tesla
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