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Bitcoin rate collapse below $20 000 and the “darkest” phase of the bear market. Main events of the week

18.06.2022

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8 min

On June 18, bitcoin fell below $20 000 for the first time since December 2020. Over the past week, the asset has lost 33,88% in price. It reached the highest values on June 11, when 1 BTC was trading at $29 121. As of June 18 at 10:20 UTC, bitcoin is $19 347 (according to Binance).

The value of the second most capitalized cryptocurrency, Ethereum, has declined 37,73% in the past seven days, with the asset trading at $1004. The native token of the cryptocurrency exchange Binance (BNB) fell in price by 28,87%, its rate is $202,87.

The total capitalization of the crypto market fell from $1,23 trillion to $930 billion during the week, with bitcoin dominating 42,23%. Ethereum's share is 14%.

Bitcoin's collapse

As the value of BTC declined, the Fear and Greed Index of the cryptocurrency market (F&G) fell to its lowest level since the COVID-19 pandemic began. On June 18, the index reached 6/100, which means “extreme fear.” In addition, for the first time in the history of bitcoin its rate fell below the maximum of the previous cycle. Almost all cryptocurrencies from CoinMarketCap's top 100 by capitalization also fell in value.

Over the past five days, bitcoin's hashrate has fallen to 209 EH/s, down more than 10% from its June 12 all-time high of 234 EH/s.

Problems with the Celsius project

Celsius, a DeFi lending platform, suspended withdrawals, exchanges, and transfers between accounts. The company said the decision was taken “due to extreme market conditions.” No timeline was given for the resumption of services. The ultimate goal of Celsius is to stabilize liquidity, as well as preserve and protect assets. Only interest accrual will be available to the platform’s clients. Against this backdrop, the value of the native token CEL fell by more than 50%, according to Binance. However, the asset has recovered significantly over the week and is $0,53 as of the 18th.

Also on June 13, state securities regulators in Alabama, Kentucky, New Jersey, Texas, and Washington launched an investigation into the suspension of customer withdrawals by Celsius. The Texas agency added that it considered investigating this situation a priority because the lack of users’ ability to get instant access to their assets may lead to “significant financial consequences.”

Representatives of the crypto lender Nexo said the company had enough liquidity and equity capital to acquire the remaining assets of Celsius, primarily their collateralized loan portfolio. The company sent a formal letter of intent regarding the debt of the lending platform.

After these events, it became known that Celsius hired lawyers to restructure the company. Akin Gump Strauss Hauer & Feld LLP became a partner in the platform. Celsius also hired specialists from the financial conglomerate Citigroup to consult on possible solutions to the company's problems. In particular, it could be about finding new sources of financing.

The crash of Three Arrow Capital

Danny Yuan, CEO of 8BlocksCapital, a trading firm, said that Three Arrows Capital (3AC) stole $1 million from their accounts to increase their balance sheet to secure borrowed funds and avoid bankruptcy.

According to Yuan’s statements, in November 2020 the parties entered into an agreement under which 8BlocksCapital should pay a fee for the use of the fund’s trading accounts. In this, 100% of the profits should belong to 8BlocksCapital and the fund does not have the right to move funds without permission.

On June 12, during the market crash, 8BlocksCapital asked 3AC to withdraw part of the funds from the accounts, which it did. However, as early as June 13, the fund did not respond to the request to withdraw additional funds. Later, 8BlocksCapital representatives noticed that about $1 million was missing from their accounts.

According to The Block, cryptocurrency exchanges FTX, Deribit, and BitMEX liquidated Three Arrows Capital (3AC) fund’s positions. This happened after 3AC failed to settle margin calls. The fund reportedly owed BitMEX around $6 million, while the impact on the FTX and Deribit platforms was “tiny.”

The “darkest” phase of the bear market

Analytics firm Glassnode released a report announcing the start of the “darkest” phase of the bear market. Although a number of indicators point to oversold conditions, bitcoin remains correlated with traditional markets and prices are declining concurrently. Micrometric indicators, such as the realized capitalization to transaction value (RVT) ratio, also continue to decline.

US investor and DoubleLine Capital co-founder Jeffrey Gundlach admitted the bitcoin rate to fall to $10 000. In his view, it was obvious that the first cryptocurrency would fall to the $20 000 level very quickly after the bulls failed to provide support at the $30 000 level. Despite the negative trend in the crypto market, Gundlach does not believe that BTC is worth buying at the current level.

Renowned trader and crypto analyst Peter Brandt admitted the probability of bitcoin's value dropping to $12 700. He called the support level of the first cryptocurrency the range from $19 000 to $20 000. The analyst noted that reaching new all-time highs (ATH) before 2024 is almost impossible.

The CEO of Euro Pacific Capital Inc. and economist Peter Schiff expects the cryptocurrency market to fall further. He warned investors against buying on the dip in the current environment. According to Schiff, the likelihood of losing much more money is very high. He added that “the need to sell bitcoin to pay the bills will only get worse as the recession deepens and many holders lose their jobs.” Schiff also mocked predictions of a sharp rise in the value of the first cryptocurrency.

Mike Novogratz, CEO of the Galaxy Digital investment company, said that cryptocurrency rates were closer to a bottom than the US stock market. In his view, the bottom line for BTC would be $20 000 and for ETH it would be $1000. The entrepreneur noted that, unlike cryptocurrencies, stocks in the equity market would fall by another 15-20%. In his view, it is not yet “time to really deploy lots of capital” in assets. Novogratz also believes it is time for the US Federal Reserve System (Fed) to stop raising interest rates.

Implementation of cryptocurrencies in Russia

The State Duma of the Russian Federation passed in the first reading a bill that introduces changes to the sphere of regulation of the circulation of digital financial assets (DFAs), including a direct ban on payments for goods and services with them. The document was prepared by Anatoly Aksakov, Chairman of the Committee on Financial Markets of the State Duma, to prevent the use of digital assets as a means of payment. To this end, the procedure for making payments for transactions that were made with financial and investment platforms, as well as information systems in which DFAs are issued.

On June 15 it became known that the first digital financial assets (DFAs) transaction would take place on Sber’s blockchain platform within one month. The bank’s platform already passed acceptance tests. Anatoly Popov, Deputy Chairman of the Management Board of Sberbank said in spring Sber received a cryptocurrency license from the Bank of Russia and was included in the register of information system operators, which can carry out the issuance of DFAs.

In September 2022, a draft law on the regulation of cryptocurrencies may be submitted to the State Duma, while a draft law on mining will be submitted for consideration soon. This was announced by Anatoly Aksakov, Chairman of the Committee on Financial Markets of the State Duma. According to him, the relevant departments are leaning toward imposing stricter regulations regarding the digital assets market.

The Ministry of Energy of the Russian Federation is developing a concept for the regulation of cryptocurrency mining. The Ministry intends to include mining in the All-Russian Classifier of Economic Activities (OKVED) and establish special electricity tariffs for crypto-assets mining.

St. Petersburg Vice Governor Stanislav Kazarin said that the city authorities were considering introducing metaverse technology into the public administration system. Kazarin suggested that with them it would be possible to create systems for accounting for the city economy, as well as to interact more effectively with citizens.

BitRiver, the largest CIS data center operator for mining, entered into a partnership with Gazprom Neft to mine cryptocurrencies using associated petroleum gas (APG). Gazprom Neft will provide power to the data centers, which BitRiver will deploy. Gazprom Neft’s goal is not to work with digital currencies, the company intends to develop new ways to make useful use of APG.

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