Bitcoin, Ethereum and other major coins plunged Monday evening as the global cryptocurrency market capitalization fell below the psychologically important $1 trillion mark to $944.9 billion – a drop of almost 12.5% intraday.
|Piece of money||24 hours||7 days||Price|
|Cryptocurrency||% change over 24 hours (+/-)||Price|
|Theta network (THETA)||+5.4%||$1.15|
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Why is this important: Risky assets were in freefall on Monday, with cryptocurrencies following the path of stocks, which remained under pressure after the latest round of US inflation data.
The S&P 500 closed in bearish territory on Monday and is now down 20% from its all-time high of 4,818 reached in January. The Nasdaq ended Monday down 4.7% at 10,809.23. Futures for the respective indices were 0.24% and 0.4% higher at press time.
Investors are eagerly awaiting the next two-day meeting of the Federal Open Market Committee which is due to begin on Tuesday.
There are expectations in the United States Federal Reserve will be more aggressive with rate hikes than expected. Goldman Sachs expects rate hikes of 75 basis points in June and July. Barclays and Jefferies made a 75 basis point hike forecast for June, reported Reuters.
The data of the CME Group indicates that the market expects a 90.9% chance that rate hikes will be in the 75 basis point region.
On the crypto side, a drop in liquidity due to the crunch is dampening investor sentiment, but digital assets are taking a double whammy.
Senior Market Analyst OANDA Edouard Moya said, “Sentiment for cryptos is dire as the global crypto market capitalization has fallen below $1 trillion. Bitcoin is trying to form a base, but if the price action falls below the $20,000 level, it could get even uglier.
Global Block Analyst Marcus Sotiriou discussed insolvency fears surrounding one of the largest cryptocurrency lending platforms, Celsiusin a note on Monday.
“They were heavily exposed to [TerraClassicUSD (USTC)] with around $500 million in customer funds, and also lost around $50 million, when the DeFi Badger DAO protocol was mined.
“The biggest problem Celsius currently has appears to be its $1.5 billion position in stETH – 1 stETH is a claim on 1 ETH locked on the Beacon Chain. Currently, stETH is trading at a discount of over 5% to ETH, raising concerns that if clients try to buy back positions, Celsius will run out of cash to repay them,” Sotiriou wrote.
StETH is an ERC20 token that represents Ether staked at Lido.
Sotiriou said Celsius was taking “heavy borrowings” against its illiquid positions to pay for client redemptions, but could run out of funds within 5 weeks.
Bitcoin and cryptocurrency investor Lark Davis tweeted that we will start to see “big sellouts” on decentralized finance platforms.
“That could mean hundreds of millions of [Ethereum] and [Bitcoin] sold market in a weak market causing prices to fall.
We are getting to the point where we are going to start seeing big liquidations on the defi platforms. That could mean hundreds of millions of $eth and $btc sold market in a weak market causing prices to fall.
Stay safe guys!
— Lark Davis (@TheCryptoLark) June 13, 2022
Senior Knowledge Analyst Will Clement tweeted that it hadn’t hit absolute bottom and said it was a “great time” to allocate heavily with a broad time horizon.
“I’ve been wanting to buy these valuation levels for 2 years and I’m not going to adjust my targets lower now that we’re here,” Clemente said on Twitter.
Chances are I won’t catch absolute bottom, which is fine with me. Probably a good time to allocate massively with a wide time horizon IMO.
I’ve been wanting to buy these valuation levels for 2 years and I’m not going to adjust my targets lower now that we’re here.
— Will Clemente (@WClementeIII) June 13, 2022
Digital Delphi said in a blog post on Monday that higher rates and tighter financial terms have not been “historically favorable” to Bitcoin.
Kevin Kellyan analyst from Delphi Digital, wrote “Bitcoin and the broader crypto market are not insulated from macroeconomic risks, including those related to global liquidity and financial conditions.”
Bitcoin-Dollar Performance Under Tighter Currency Conditions – Courtesy of Delphi Digital
“History suggests that it is not rate hikes that negatively impact BTC as much as tighter liquidity conditions and increased market volatility coupled with strong risk sentiment,” Kelly wrote.
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