Good morning, and welcome to First Mover. I’m Bradley Keoun, here to take you through the latest in crypto markets, news and insights. (Lyllah Ledesma is off.)
- Price point: Bitcoin slides toward $20K, a price level not seen since 2020, as the U.S. Federal Reserve prepares to jack up interest rates.
- Market Moves: Distress is spreading across the crypto industry, with pain felt from the crypto lender Celsius to the hedge fund Three Arrows. The celebrity investor Kevin O'Leary tells CoinDesk that, "We need someone to go to zero."
Bitcoin (BTC) neared $20,000 in European hours Wednesday, sliding toward a crucial psychological level not seen since 2020, as distress spread across crypto and traditional markets.
The price of the largest cryptocurrency by market value has now declined for nine straight days, a record losing streak in pricing data going back to the early 2010s.
Turmoil in traditional markets pushed the European Central Bank to hold a rare, unscheduled meeting on Wednesday to discuss rising borrowing costs. (And markets quickly bounced on the news.) In a statement, the ECB promised to "apply flexibility" in its campaign to tighten monetary conditions, in light of the "current market situation."
The U.S. Federal Reserve is scheduled to conclude its latest closed-door meeting on monetary policy with a statement at 2 p.m. ET on Wednesday, and bond traders now fully expect a 0.75 percentage point interest-rate hike, the biggest since the 1990s. (Officials are expected to publish an update of their closely tracked "Summary of Economic Predictions," known colloquially as the "dot plot.")
Sentiment among investors remains bearish, CoinDesk's Shaurya Malwa reported.
“Concerns around a sharp tightening of monetary policy are weighing on financial markets and are trickling down into cryptocurrencies through their influence on large institutional investors,” Alex Kuptsikevich, an FxPro senior market analyst, said in an email to CoinDesk. “It is not surprising that bitcoin and ether are dragging the entire cryptocurrency market down in such an environment."
The rapid tightening of monetary conditions – part of a push by central bankers to tamp down fast-rising inflation – has sucked liquidity out of crypto markets, and now cracks are appearing across the industry.
Crypto lender Celsius paused all withdrawals earlier this week, citing "extreme market conditions," leading to questions about the firm’s liquidity. The Wall Street Journal reported Wednesday that Celsius has hired lawyers specializing in business restructuring to help it navigate its thorny financial situation.
Prominent crypto fund Three Arrows Capital faced at least $400 million in liquidations and scrambled to lower its collateral levels by selling key positions. The Block reported Wednesday that Three Arrows Capital, popularly known as 3AC, has faced liquidations by crypto lending firms and is in the process of repaying lenders and counterparties.
Some firms are coming out proactively with self-assessments of good health (or innocence in the eyes of traders).
Tether, the issuer of the popular dollar-linked stablecoin USDT, denied claims that its commercial paper portfolio is 85% backed by Chinese or Asian commercial paper, as reported by CoinDesk's Jamie Crawley.
Tether described certain rumors to this effect as "completely false and likely spread to induce further panic in order to generate additional profits from an already stressed market," in an announcement on Wednesday.
'Go to zero'
According to FSInsights, an analysis firm, the combination of macro headwinds and over-leveraged yield strategies has resulted in the forced selling of cryptocurrencies in the last few days, wiping more than $200 billion in value from the digital asset market, Will Canny reported.
The “takedown of terraUSD (UST) and Celsius is long-term constructive for the industry,” wrote the head of digital asset strategy, Sean Farrell.
“Such public displays of ignorant capital destruction are often overlooked in the traditional finance industry (or take a very long time to unwind),” his note said. Fortunately, he wrote, crypto markets have the benefit of “iterating and improving at a more rapid pace."
The prevailing sense in the market, though, is that there's plenty of pain still to come.
The celebrity investor Kevin O’Leary says he isn’t ready to call a bottom in the crypto sector short of a major negative occurrence.
“You don’t get a bottom until you have an event,” O’Leary told CoinDesk this week. “In the crypto world, we need someone to go to zero.”
- Celsius Troubles, UST Collapse Could Have Long-Term Benefits for Crypto, FSInsight Says The crypto lender was notorious for promoting risk-free yields on client assets, the report said.
- Kevin O'Leary Says ‘Panic Event’ Is Needed Before Crypto Bottoms Kevin O’Leary spoke to CoinDesk ahead of the move to the Toronto Stock Exchange of WonderFi, the crypto marketplace in which he’s a strategic investor.
- Bitcoin Drops Toward $20K Amid Contagion Risks in Crypto Markets The asset is nearing a price level not seen since 2020 as prominent crypto firms see possible insolvencies.
- Tether Denies Claims of Asian Commercial Paper Backing, Exposure to Three Arrows Capital Tether described certain rumors spreading to this effect as "completely false and likely spread to induce further panic."
- Asset Manager AllianceBernstein to Add Blockchain Technology in Deal With Allfunds Unit AllianceBernstein said blockchain technology will be transformative to the asset -management business.
- Three Arrows Faces Possible Insolvency After Unforeseen Liquidations The investment firm has been one of the most vocal crypto market participants in the past few years.
- ’Stripe for NFTs’ NFTPort Raises $26M Series A The round was co-led by Atomico and Taavet+Sten, the investment arm from the co-founders of Wise and Teleport.
- Crypto Lender Celsius Hires Restructuring Attorneys, WSJ Reports Celsius announced early Monday it would pause withdrawals along with its swap and transfer products, citing "extreme market conditions."
- Swan Bitcoin CEO Calls Celsius Withdrawal Freeze ‘So Opaque’ Cory Klippsten said on CoinDesk TV’s “First Mover” program that the crypto lending platform had misled investors.
Today’s newsletter was edited by Bradley Keoun and produced by Parikshit Mishra.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.