Evidence of stress within the industry is piling up against a backdrop of monetary tightening, as evidenced by the plunge in the price of the digital currency.
The largest digital token fell as much as 10% to $18,334 on Saturday, marking the 12th day in a row that it has fallen. The price of ether dropped to the lowest level in more than two years. The two bellwethers of the market are both down from all-time highs.
"What we're seeing is more liquidations driving prices and sentiment lower, whichtriggers more liquidations and negative sentiment -- some flushing-out needed still, but this will at some stage exhaust itself."
The high of the coin at the end of the last bull cycle in 2017) was pushed below by the current leg down. It has never dropped below previous cycle peaks in its 12 years of trading.
With every token on the monitor trading in the red, alt coins were no exception. Cardano, Solana, Dogecoin, and Polkadot all recorded falls of between 9% and 12% on Saturday.
Higher interest rates and bad news cycles have hurt riskier assets. The Federal Reserve raised its main interest rate on June 15 by three-quarters of a percentage point, the biggest increase since 1994, and central bankers signaled they will keep hiking aggressively this year.
Alkesh Shah, head of cryptocurrencies and digital assets strategy at Bank of America Corp., said in a note on Friday that investors are positioning defensively. The removal of the sector's froth is likely healthy as investors shift their focus to projects with clear road maps to cash flow and profitability.
The collapse of the Terra blockchain last month and the decision of Celsius Network to stop withdrawals this week made for a more stressed environment.
Three Arrows Capital suffered large losses and said it was considering asset sales or a rescue, while Babel Finance followed in Celsius's footsteps. According to researcher Glassnode, even long-term holders are coming under pressure.
The focus of the last few days has been Three Arrow Capital and Babel Finance. The founder of 3AC seems to be missing after it was claimed that he suffered huge losses due to the drop in the price ofCryptocurrencies.
Stable coins, which are pegged to the value of a currency, have struggled.
According to Bank of America's Shah, the top four stable coins saw net outflows last week that were 4.5 times larger than the previous week. Stable coins are often used by traders to move funds around without having to exit into traditional currencies, so investors remain defensive, he said.
Despite the piercing of the key $20,000 level, historical data shows that the token may find some support around that mark as previous selloffs show where the token usually finds points of resilience.
He said in a note on Wednesday that it could build a base of $20,000 as it did in the previous two years. There are signs of the maturing digital store-of-value.
There was a time when the market was worth $69,000 and traders poured cash into speculative investments. The total market cap of Cryptocurrencies was $870 billion on Saturday, down from $3 trillion in November.
Along with assistance from Emily Nicolle and others.
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