Bitcoin, which posted its biggest monthly decline ever, plagued traders with sharp swings on Friday morning as cryptocurrencies search for direction.
The biggest cryptocurrency rallied as much as 11.3% in Asia on Friday, briefly approaching the $21,000 level.
Bitcoin then quickly lost most of those gains as global equity markets sank, trading at $19,410 at 7 a.m. London time, while trading at similar levels at this time.
June’s 41% drop was the steepest monthly drop in data available to Bloomberg dating back to 2010, while also marking the worst quarterly drop since 2011, and about 1.2 trillion, according to CNBC data. dollars have been lost from the total value of the cryptocurrency market.
Amidst this chaos, cryptocurrency companies have announced layoffs and the industry is moving toward consolidation through acquisitions.
What were the five most important developments that affected its price?
1. Macroeconomic fears
During the quarter, the Federal Reserve made two aggressive interest rate hikes to combat runaway inflation. This raised fears of a recession in the US and other countries.
This also hit stocks, especially the big tech companies. The tech-heavy Nasdaq fell 22.4% for the second quarter, its worst quarterly performance since 2008.
Bitcoin has been closely correlated with the price movement of US stock indices. The sell-off in stocks has weighed on bitcoin and the cryptocurrency market as investors ditch risky assets.
2. The collapse of terraUSD
The first major incident last quarter was the collapse of the algorithmic stablecoin terraUSD and the token luna.
A stablecoin is a type of cryptocurrency that is usually tied to a real asset. TerraUSD, or UST, was supposed to be pegged to the US dollar, at a one-to-one rate.
Some stablecoins are backed by real assets, such as fiat money or government bonds. But UST was governed by an algorithm, the system failed and TerraUSD lost its connection to the dollar and caused the collapse of the linked luna token, which was now worthless.
3. Lender Celsius stops withdrawals
Cryptocurrency lender Celsius stopped withdrawals for its customers in June.
The company offered users over 18% returns if they deposited cryptocurrency into Celsius. He then lent that money to people in the market who were willing to pay a high interest rate to borrow it.
But falling prices put that model to the test. Celsius cited “extreme market conditions” as the reason for halting withdrawals.
On Thursday, Celsius said in a blog post that it was taking “significant steps to preserve and protect assets and explore the options available to us.”
Those options include “pursuing strategic transactions as well as restructuring our liabilities, among other ways.”
The problems with Celsius exposed the weakness in many of the lending models used in the cryptocurrency industry that offered users high returns.
4. The developments with Three Arrows Capital
Three Arrows Capital is one of the most well-known hedge funds focused on investing in cryptocurrencies, and is facing a divestment of assets, a source with knowledge of the matter told CNBC, in yet another sign of the crisis the cryptocurrency industry is going through. .
The Financial Times reported last month that US-based cryptocurrency lenders BlockFi and Genesis liquidated some of 3AC’s positions. 3AC had borrowed from BlockFi, but was unable to meet the margin call.
3AC then defaulted on a loan worth more than $660 million from Voyager Digital. As a result, Three Arrows Capital is divesting assets, a person with knowledge of the matter told CNBC this week.
5. The freezing of transactions by Coinflex
Cryptocurrency exchange CoinFlex stopped customer withdrawals last month, citing “extreme market conditions.”
CoinFlex had yet another problem with a customer who defaulted on a $47 million debt, creating a liquidity problem for the company. That client was well-known investor Roger Ver.
The exchange said that normally, in case of existence of a negative account, a process of liquidation of its positions is followed. But CoinFlex and Ver had an agreement that didn’t allow that.
CoinFlex has issued a new token called Recovery Value USD, or rvUSD, to raise $47 million to be able to continue withdrawals, and is offering a 20% interest rate for investors looking to buy and hold the digital currency.