The cryptocurrency market melted back together on Monday, as the price of Bitcoin plummeted to its lowest point since 2020, wiping out years of investment.
Bitcoin is down 18 percent in the past 24 hours, falling to about $23,000, its lowest value since December 2020, according to CoinMarketCap, an industry price tracker. Ether, the second most valuable cryptocurrency, is down more than 20 percent.
The crash extends a difficult period for cryptocurrencies, illustrating in graphic terms the risks of these experimental investments. Just a month ago, the implosion of a popular currency caused a crypto meltdown that wiped $300 billion of value from the market.
Crypto prices started to fall again late last week, when a report showed a rise in inflation in the United States, shaking the markets. Investors feared this could prompt the Federal Reserve to raise interest rates higher and faster, a move that could hit the US economy.
The price decline was accelerated over the weekend by an announcement by Celsius, an experimental crypto bank, that it was halting withdrawals “due to extreme market conditions”. At one point this year, Celsius had nearly $20 billion in assets, attracting depositors with a promise of yields of up to 18 percent if they entrusted their cryptocurrency to the project.
Celsius is one of a number of start-ups in the murky world of decentralized finance that will come under intense scrutiny as crypto prices plummet.
The May crash was accelerated by the collapse of TerraUSD, a so-called fixed-price stablecoin pegged to the US dollar. The coin’s $1 pin was backed by complex financial engineering that linked it to a sister cryptocurrency called Luna. As Luna’s price plummeted in May, TerraUSD collapsed – a “death spiral” that destabilized the broader market.
A similar process took place on Sunday, when Celsius announced it was stopping filming. On a Reddit page for Celsius clients, panicked investors wondered if they could ever get their deposit back. The news rippled across the crypto markets, causing Bitcoin and Ether prices to plummet.