Bitcoin eases from 18-month low as crypto market stabilises

Representation of cryptocurrency bitcoin is seen in this illustration taken November 29, 2021.
PHOTO: Reuters

LONDON/NEW YORK — Bitcoin recovered on Wednesday (June 15) after diving to an 18-month low, buoyed by the US Federal Reserve's tough stance on inflation even in the midst of a market meltdown this week after crypto lender Celsius froze customer withdrawals.

The world's largest cryptocurrency fell as much as 7.8 per cent to US$20,079.72 (S$28,000), its lowest since December 2020. It has lost about 33 per cent against the US dollar since Friday, dropping more than 50 per cent since the beginning of the year. It has slumped about 70 per cent from its record high of US$69,000 in November.

Bitcoin was last down 1.31 per cent at $21,669.37.

The digital currency sector has been pummelled this week after Celsius froze withdrawals and transfers between accounts, stoking fears of contagion in markets shaken by the demise of the TerraUSD and Luna tokens last month.

Cryptocurrencies were buoyed as the S&P 500 rallied after a policy announcement by the Federal Reserve to raise interest rates, snapping a five-session losing skid.

The Federal Reserve raised its target interest rate by three-quarters of a percentage point, its biggest rate hike since 1994.

Crypto funds saw outflows of US$102 million last week, according to digital asset manager CoinShares, citing investors' anticipation of tighter central bank policy.

The value of the global crypto market has tumbled 70 per cent to under US$900 billion from a peak of US$2.97 trillion in November, CoinMarketCap data shows.

"Some parts of the broader crypto ecosystem are facing a rather harsh reckoning," said Mikkel Morch, executive director at digital asset hedge fund ARK36. "As the reality of the bear market starts to settle in, the hidden leverages and structural weaknesses of projects that only worked when the prices went up are finally brought to light."

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Crypto firm Celsius pauses all transfers and withdrawals between accounts
Crypto firm Celsius pauses all transfers and withdrawals between accounts

Celsius has hired restructuring lawyers and is looking for possible financing options from investors, the Wall Street Journal reported, citing people familiar with the matter. Celsius is also exploring strategic alternatives including a financial restructuring, it said.

Smaller cryptocurrencies, which tend to move in tandem with bitcoin, also fell. Ether, the second largest token, fell to as low US$1,013, the lowest since January 2021, and was last down 1.22 per cent at US$1,172.76.

The chaos in the crypto market has spread to other companies, with a number of exchanges slashing workforces.

Major US exchange Coinbase Global Inc said on Tuesday it would cut about 1,100 jobs, or 18 per cent of its workforce. Gemini, another US exchange, said this month it would cut 10 per cent of its workforce.

Still, others continue to hire. Binance, the world's largest exchange, said it was hiring for 2,000 positions, and US exchange Kraken said it had 500 roles to fill.

"Hunker down," tweeted Binance CEO Changpeng Zhao.

Crypto hedge fund Three Arrows, facing social media chatter it is facing liquidation issues, said it was committed to working things out.

US crypto broker Genesis also sought to ease investor concerns, saying its balance sheet was strong and its lending business continued to meet client demand despite elevated market volatility.