Macro factors are contributing to volatility in the crypto markets.
Bitcoin fell below $24,000 on Monday, its lowest level since December 2020, as investors fled the cryptocurrency amid a broader sell-off in risk assets.
Meanwhile, a crypto lending company called Celsius has halted withdrawals for its customers, raising concerns about market contagion.
According to CoinDesk data, the world’s largest cryptocurrency bitcoin fell below the $24,000 mark and was trading around $23,575 at 7:45 a.m. on Wall Street.
Over the weekend and into Monday morning, the cryptocurrency market had lost more than $200 billion. According to CoinMarketCap data, the cryptocurrency market capitalization fell below $1 trillion on Monday for the first time since February 2021.
With rampant inflation continuing and the US Federal Reserve expected to raise interest rates this week to control rising prices, macro factors are contributing to bearishness in the crypto markets.
Last week, US indices fell sharply, with the tech-heavy Nasdaq leading the way. Bitcoin and other cryptocurrencies have historically had a positive correlation with stocks and other risk assets. When these indices fall, crypto falls with them.
Celsius is ‘feeding the fire.’
Since mid-May, when the so-called algorithmic stablecoin terraUSD, or UST, and its sister cryptocurrency luna collapsed, the crypto market has been on edge as well.
The market is now concerned about Celsius, a crypto lending company that announced on Monday that it is suspending all withdrawals, swaps, and transfers between accounts “due to extreme market conditions.”
Celsius, which claims to have 1.7 million customers, advertises to its users that the platform can provide an 18% yield. Celsius accepts cryptocurrency deposits. This cryptocurrency is then lent to institutions and other investors. As a result of the revenue earned by Celsius, users receive yield.
However, the crypto market downturn has harmed Celsius. According to its website, the company’s assets were worth $11.8 billion as of May 17, down from more than $26 billion in October of last year.
According to CoinGecko, CEL, Celsius’ own coin, is down more than 50% in the last 24 hours. Investors are concerned about broader crypto market contagion.