Bitcoin drops below $18,300 as sell-off accelerates — here’s what happened

Bitcoin drops below ,300 as sell-off accelerates — here’s what happened


Bitcoin plunged to $18,248, and ether fell to $944 as of mid-afternoon on Saturday, as the sell-off in the crypto market accelerates. The world’s two most popular cryptocurrencies are down more than 35% in the past week, as both breach symbolic price barriers.

Carnage in the crypto market is partly to do with pressure from macroeconomic forces, including spiraling inflation and a succession of Fed rate hikes. We have also seen these blue chip cryptos track equities lower. It doesn’t help that crypto firms are laying off large swaths of employees, and some of the most popular names in the industry are facing solvency meltdowns.

Here’s how we got here.

Monday

Celsius CEO Alex Mashinsky.

Piaras Ó Mídheach | Sportsfile for Web Summit | Getty Images

The week started with crypto prices plummeting, and bitcoin falling as much as 17% at one point in the day. It seemed like the crypto winter was here.

In the chaos, Celsius, a major crypto staking and lending firm, shocked the market when it announced that all withdrawals, swaps and transfers between accounts have been paused due to “extreme market conditions.” In a memo addressed to the Celsius Community, the platform also said the move was designed to “stabilize liquidity and operations.”

Celsius effectively locked up its $12 billion in crypto assets under management, raising concerns about the platform’s solvency. The news rippled across the crypto industry, reminding some of what happened in May, when a failed U.S. dollar-pegged stablecoin project lost $60 billion in value and dragged the wider crypto industry down with it.

Celsius was known for offering users a yield of up to 18.63% on their deposits. It’s like a product a bank would offer, except with none of the regulatory safeguards.

Those crazy high yields were what eventually came under scrutiny.

“This risk certainly seems like it’s just the beginning,” said John Todaro, Needham’s vice president of crypto assets and blockchain research.

“What I would say is on the decentralized side — a lot of these DeFi protocols, a lot of those positions are over collateralized, so you shouldn’t quite see the underfunding situation that could happen with centralized borrowers and lenders. But that being said, you could still see a lot of liquidations with that collateral being sold off on DeFi protocols,” continued Todaro.

Tuesday

People watch as the logo for Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021.

Shannon Stapleton | Reuters

Wednesday

Michael Saylor, chairman and chief executive officer of MicroStrategy, first got into bitcoin in 2020, when he decided to start adding the cryptocurrency to MicroStrategy’s balance sheet as part of an unorthodox treasury management strategy.

Eva Marie Uzcategui | Bloomberg | Getty Images

MicroStrategy CEO Michael Saylor appeared on CNBC Wednesday morning to discuss concerns around his firm, which has made a $4 billion bet on bitcoin. Saylor has said the company doubles as the first and only bitcoin spot exchange-traded fund in the U.S., so investing in MicroStrategy is the closest you’ll get to a bitcoin spot ETF.

MicroStrategy has used company debt to purchase bitcoin, and in March, Saylor decided to take another step toward normalizing bitcoin-backed finance when he borrowed $205 million using his bitcoin as collateral — to then buy more of the cryptocurrency.

“We have $5 billion in collateral. We borrowed $200 million. So I’m not telling people to go out and take a highly leveraged loan. What I am doing, I think, is doing my best to lead the way and to normalize the bitcoin-backed financing industry,” said Saylor, who added that publicly traded crypto miner Marathon Digital also took out a credit line with Silvergate Bank.

As bitcoin prices tanked this week, investors worried the company would be asked to put up more collateral for its loan, but Saylor said the fears were overblown.

“The margin call is much ado about nothing,” Saylor told CNBC earlier this week. “It’s just made me Twitter famous, so I appreciate that…We feel like we have a fortress balance sheet, we’re comfortable, and the margin loan is well managed.”

Then on Wednesday afternoon, the Federal Reserve raised its benchmark interest rates three-quarters of a percentage point in its most aggressive hike since 1994. The Fed said the move was made in an effort to curb sky-high inflation.

Crypto prices initially rallied on the news as investors hoped we could avoid a recession, but that rally was short-lived.

Thursday       

Bitcoin and and other cryptocurrencies are in free fall.

Dan Kitwood | Getty Images

Friday into Saturday

Bitcoin and other cryptocurrencies fell sharply as investors dump risk assets. A crypto lending company called Celsius is pausing withdrawals for its customers, sparking fears of contagion into the broader market.

Nurphoto | Nurphoto | Getty Images

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