On June 30, 2022, Bitcoin crashed below $19,000 for the first time this year. In the second quarter of 2022, it lost almost 58 percent of its value, achieving its worst quarterly performance since 2011.
Many significant players in the crypto market have faced difficulties, and additional dips could compel other crypto investors to sell holdings to meet margin calls and recover losses.
Bitcoin lost about 58% of its value. On the cryptocurrency market as a whole, about $1.2 trillion has been lost. Here are five big things that happened in the cryptocurrency industry in the last three months.
1. Macroeconomic pressure
The U.S. Federal Reserve raised interest rates twice quickly to stop inflation from getting out of hand. This has made people in the U.S. and all over the world worry about a recession.
The interest rate hike has also hurt stocks, especially fast-growing technology companies. The tech-heavy Nasdaq Composite is down 22.4 per cent for the second quarter and is the worst quarterly performance since 2008.
Bitcoin’s price changes have been very similar to U.S. stock indexes. As investors dump risky assets, the sell-off in stocks has hurt bitcoin and the crypto market.
2. TerraUSD collapse
The collapse of the TerraUSD stablecoin has scared away crypto investors. TerraUSD, or UST, was supposed to be pegged to the US dollar one-to-one. Some stablecoins are backed by physical assets like fiat cash or government bonds. However, UST was governed by an algorithm and a complicated system of coin burning and minting.
3. Lender Celsius halts withdrawals
Cryptocurrency lender Celsius paused customer withdrawals in June. They suggested that if consumers deposit cryptocurrency with Celsius, they will receive more than 18% returns. It then lent that money to cryptocurrency market participants who were willing to pay a high-interest rate to borrow the money.
4. Three Arrows Capital liquidation
Three Arrows Capital is a bitcoin hedge fund that mainly invests in cryptocurrency. It had exposure to terraUSD and luna, which crumbled.
BlockFi and Genesis liquidated some of 3AC’s positions, the Financial Times reported last month.The company borrowed from BlockFi but couldn’t meet the margin. A margin call is when an investor must commit extra funds to avoid losing on a borrowed trade.
Voyager Digital loaned Three Arrows Capital $660 million, but 3AC defaulted. The company has since liquidated, a source told CNBC. The firm showed the extremely leveraged nature of trading in recent years.
5. CoinFlex-‘Bitcoin Jesus’ spat
Last month, CoinFlex stopped customers from getting their money out because of “extreme market conditions” and a customer whose account went into negative equity.
CoinFlex said that the customer, who it says is well-known cryptocurrency investor Roger Ver, owes $47 million to the company. Ver, who was known as “Bitcoin Jesus” in the early days of the industry for his religious views on it, says he doesn’t owe CoinFlex any money.