Bitcoin’s price continues to fall amid crypto liquidations, fire sales

by James · July 9, 2022

Bitcoin resumed the slide this week and the crypto winter is getting colder. Several crypto funds and lenders are on the edge, while the turmoil in the stock market has weighed on Bitcoin and other cryptocurrencies, which have traded as speculative growth stocks.

Bitcoin failed to hang on to $ 21,000 at the beginning of the week and fell briefly as low as $ 18,650 late Thursday. It quickly took back $ 20,000, but fell to around $ 19,500 on Friday night.

The Bitcoin price hit a 18-month low near $ 17,600 on Saturday, June 18th.

BTC bears have outweighed bulls all week. Short-term interest rates on crypto have been higher than long-term interest rates, which means that more traders believe that the price will go lower. Bitcoin has a Long / Short ratio of 0.98, according to CoinGlass data. Over the past 24 hours, over $ 238 million in Bitcoin and Ethereum futures have been liquidated due to the failure of leveraged positions to meet margin requirements.

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But it has not only been bad news for digital assets. The European Union enacted legislation to regulate cryptocurrencies and services in its 27 nations. The guidelines require that crypto questions be registered with the authorities and publish white papers – documents that describe the technology and purpose of the projects. The new law, called Markets in Crypto Assets (MiCA), also ensures that exchanges maintain stable coin reserves to prevent mass withdrawals.

While the industry in general is gnawing at regulations and compliance, the new rules can provide much-needed security and trust.

In May, algorithmic stablecoin terraUSD and sister currency LUNA collapsed, wiping out $ 40 billion in value. It sent shockwaves of losses across crypto and made some firms insoluble, such as Three Arrows Capital which had exposure to LUNA.

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Three Arrows Capital Liquidation

A court in the British Virgin Islands ordered Three Arrows Capital (3AC) to liquidate on Thursday after it defaulted on Bitcoin loans. The Crypto Hedge Fund failed to make payments on its $ 15,250 BTC and $ 350 million USDC brokerage loan Voyager Digital (VYGVF). Based on BTC’s price, it was worth around $ 807 million at the beginning of June, but only around $ 645.2 million at the time this report was written. 3AC also borrowed around USD 80 million from lender BlockFi, and the positions were liquidated after being unable to meet margin calls.

BlockFi Buyout

On Thursday, the crypto exchange FTX signed an agreement to save BlockFi. It includes an option to buy BlockFi at a maximum price of $ 240 million, based on performance triggers, BlockFi CEO Zac Price said in a tweet. FTX US will also provide a $ 400 million revolving credit facility to the digital asset lender. Things have gone from bad to worse for BlockFi. In July last year, it was valued at almost 5 billion dollars and there was talk of listing. Now it’s worth around $ 500 million. Investment firm Morgan Creek Digital also sought $ 250 million to buy a majority stake in the company.

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Morgan Creek will not be the only one upset by the deal. FTX was in talks with the cryptocurrency lending platform Celsius. But FTX went bankrupt due to a $ 2 billion hole in Celsius’ balance sheet, The Block reported. On June 12, Celsius froze withdrawals and transfers due to extreme market conditions, locking the money to its 1.7 million users. The company had about $ 12 billion under management in May, the company said.

“We are focused and working as fast as we can to stabilize liquidity and operations, to be positioned to share more information with society,” Celsius published in a blog post on Thursday. The company says it is taking steps to preserve assets and explore alternatives, such as pursuing strategic transactions and restructuring liabilities.

GBTC rejection

Grayscale is suing the SEC after regulators rejected their bid to make the Grayscale Bitcoin Trust (GBTC) a spot Bitcoin ETF. Grayscale originally applied to turn GBTC into an ETF in October 2021, but faced several delays in the ruling. The SEC cited concerns about potential market manipulation in its rejection on Wednesday. Grayscale said the SEC is inconsistent in approving Bitcoin futures ETFs, but denies ETFs that have the same asset.

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On Wednesday, Meta (META) Product Manager Navdeep Singh announced that the company is launching NFTs on Facebook. In a post, Singh shared photos of a new “Digital Collectibles” tab on profile pages to showcase NFTs. Meta started previous tests to add NFTs to Instagram in May. In the post, CEO Mark Zuckerberg said that the company plans to work with 3D NFTs for its augmented reality platforms. Meta also makes virtual reality headsets called Meta Masks, formerly known as Oculus Quest.