The price of bitcoin briefly plummeted below the $21,000 threshold for the first time since December 2020 on Monday night as investors braced for a looming recession and reacted to difficulties at a major exchange.
Bitcoin was staging a slight rally and was trading near $22,000 as of Tuesday morning, but the leading cryptocurrency was still down approximately 9% over the last 24 hours, according to Coinbase data. The price is down nearly 70% from its all-time high of $69,000 achieved last November.
The selloff caused the overall market capitalization of the cryptocurrency market to sink below $1 trillion, according to CoinGecko data. The market was valued at more than $3 trillion in November.
Ethereum, the second largest cryptocurrency, was down more than 5% to $1,182.
This week’s volatility on the digital asset market occurred after Binance, the world’s largest cryptocurrency exchange, temporarily halted bitcoin withdrawals. Binance CEO Changpeng Zhao said the move was a “temporary pause” on “a stuck transaction causing a backlog.”
Selloffs in cryptocurrency market have also coincided with downturns in traditional assets over the last several months. Investors have sought to dump their riskier assets, such as cryptocurrencies and high-growth tech stocks, as the Federal Reserve enacts interest rate hikes meant to cool inflation.
The Fed is expected to hike interest rates by a larger-than-normal amount – potentially as high as 1% — at its meeting this week after a dismal May Consumer Price Index report that showed inflation rose 8.6%. Consumer prices have surged at their highs rate since December 1981.
The S&P 500 sank into a bear market during a major selloff on Monday that also saw the Dow Jones Industrial Average plummet more than 800 points. The tech-heavy Nasdaq index was down 530 points, or 4.7%.
The plummeting value of cryptocurrencies has already resulted in major consequences for several firms active in the sector.
MicroStrategy, a software firm that has bet heavily on bitcoin, faced a potential margin call for more collateral after the price dipped below $21,000, Bloomberg reported.
CoinBase, the largest publicly traded cryptocurrency exchange, revealed Tuesday that it would lay off 18% of its full-time workforce as part of cost-cutting measures meant to help the embattled firm withstand “crypto winter.”
Coinbase CEO Brian Armstrong – who had urged unhappy workers to quit the company earlier this week – said the company had expanded its headcount “too quickly” during an era of high growth in the tech sector.
“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong said.
Several other crypto firms, including the Winklevoss twins’ Gemini, the 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, plunging cryptocurrency prices have prompted panic among retail investors who poured their savings into digital tokens.