Bitcoin Nears $20,000 As Crypto Markets Risk Contagion

Bitcoin Nears $20,000 As Crypto Markets Risk Contagion

As Bitcoin tumbles toward $20,000, contagion risks are rising in the cryptocurrency markets. Prominent crypto firms are seeing possible insolvencies, and the asset is nearing a price level not seen since 2020. The drop comes as major financial institutions have increased their exposure to cryptocurrencies.

The cryptocurrency market has been incredibly volatile in recent months, with prices swinging wildly up and down. And while some investors see this as an opportunity to buy assets on the cheap, others fear further losses.

Bitcoin’s price decline over the past 12 weeks has been relatively steady, with only a few short-lived rallies. The overall market sentiment appears to be pretty weak. There is a real possibility that contagion from within the crypto market could push prices even lower shortly.

While it is still too early to say definitively whether or not this will happen, investors should remain cautious and monitor the situation closely.

The news of Celsius pausing withdrawals and Three Arrows liquidating key positions has sent shockwaves through the crypto community. Some are questioning the liquidity of these firms, while others are scrambling to understand what this means for the future of crypto.

Celsius is one of the largest crypto lenders, and its decision to halt withdrawals has left many people wondering if they will be able to get their money back. Three Arrows is a well-known crypto fund, and their liquidations have some worried about the stability of the markets.

It’s still too early to tell what these events will mean for the future of cryptocurrency, but it’s safe to say that there is a lot of uncertainty in the air. Many people are watching closely to see how these situations play out, and only time will tell what effect they will have on the industry.

Bitcoin’s price decline over the past week has been sharp, showing no signs of stopping. The cryptocurrency was now down 30% from its highs just a week ago, and the sell-off appears far from over. Tuesday’s losses in U.S. hours were notable, with the price falling below $22,000 for the first time in days. Wednesday morning has seen more selling pressure, with the bitcoin price dropping below $21,000. This marks an eighth consecutive day of losses for the cryptocurrency, rapidly approaching the bear market territory.

There are a few potential factors behind bitcoin’s recent slump:

  1. There was a significant correction in early January following the incredible price run-up late last year.
  2. China has cracked down on cryptocurrency trading recently, which may be causing some investors to lose confidence in the space.
  3. It’s worth noting that bitcoin tends to be very volatile compared to other asset classes, so sharp declines are not entirely out of character for the digital currency.

Looking ahead, it remains to be seen how much other bitcoin will fall before buyers step back in and start pushing prices higher again. For now, though, it looks like the bears are firmly in control, and there could be more pain ahead for crypto investors before this latest sell-off ends.

Inflation in the United States

Inflation in the United States unexpectedly increased in May, raising concerns that the Federal Reserve may need more aggressive action to cool down the world’s largest economy. The Consumer Price Index (CPI) report for May showed inflation hit 8.6% on a year-on-year basis, 0.3 percentage points higher than the expected 8.3% level. The data sent global markets downward earlier this week as investors priced in further rate increases.

While higher inflation is typically associated with strong economic growth, too much inflation can be detrimental to an economy. When prices rise too quickly, it can lead to imbalances and asset bubbles as people try to keep up with the rising cost of living. This can eventually lead to a sharp economic slowdown or even a recession.

The Fed has been gradually increasing Interest rates over the past few years to head off inflationary pressures. Still, so far, it has been careful not to go too far too fast and risk derailing the recovery. However, with inflation now exceeding the Fed’s 2% target, policymakers could be more pressured to act more aggressively.

Barinem Pene Verified

Barry Pene is a stern blockchain research/copywriter. Barry has been trading cryptos since 2017 and has been invested in issues that would put the blockchain industry on the right pedestal. Barry's research expertise cuts across blockchain as a disruptive technology, DeFis, NFTs, Web3, and reduction of energy consumption levels of cryptocurrency mining.

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