Bitcoin dips below $19,000 in broad crypto sell-off as Three Arrows liquidation sends ripples through the market

·3 min read
Michael saylor, dressed in all black, sits on a white couch, next to another man in all white, with a giant orange Bitcoin logo behind them.
Bitcoin bull Michael Saylor faces significant unrealized losses and a potential margin call after the cryptocurrency slipped below $20,000.Joe Raedle/Getty Images
  • Bitcoin slipped briefly below $19,000 Thursday after crypto hedge fund Three Arrows Capital fell into liquidation.

  • Cryptocurrencies have slumped as investors shun risky assets thanks to growing worries about recession.

  • High-profile financial troubles have cast doubt on the stability of the crypto sector, also putting pressure on prices.

Bitcoin slipped briefly below $19,000 Thursday, as losses for cryptocurrencies deepened after the liquidation of troubled hedge fund Three Arrows Capital sparked fresh worries about the stability of the digital-asset sector.

The leading cryptocurrency by market value dropped to $18,914, according to CoinDesk data, before recovering somewhat to regain $19,000 again. It was last trading 5% lower on the day at around $19,041, down about 60% year-to-date.

Elsewhere in the market, ethereum dropped 9.4% to $1,018.93, and is now down more than 70% year-to-date. Major altcoins cardano, solana, and XRP fell 6.5%, 9.9% and 6.1% respectively. The

Cryptocurrencies have suffered a steep sell-off this year alongside assets like growth stocks as investors turned to less  risky investments in the face of rising inflation and a potential recession.

At the same time, high-profile financial troubles and bailouts in the crypto ecosystem have cast doubt on the stability of the sector. That has put pressure on crypto prices including bitcoin, and analysts said the liquidation of Three Arrows Capital, also known as 3AC, on Wednesday could continue to push prices down.

"Concerns are growing that the collapse of Three Arrows Capital could trigger further market contagion," Oanda analyst Edward Moya said in a note.

A British Virgin Islands court ordered the liquidation of 3AC after it defaulted on repaying a $670 million loan to the lending firm Voyager Digital. The hedge fund, co-founded by Su Zhu and Kyle Davies in 2012, is estimated to have lost $400 million in the crypto market crash, The Block reported.

It isn't the first high-profile crypto company to suffer thanks to the bear market. Major lender Celsius froze all withdrawals after suffering liquidity issues earlier this month, while the stablecoin issuer Terra saw its tokens USDT and luna both collapse in May.

Meanwhile, FTX CEO Sam Bankman-Fried said there are some crypto exchanges that are already secretly insolvent, according to Forbes.

There's also been renewed scrutiny of companies that have taken out bitcoin-backed loans. Longtime bull Michael Saylor's MicroStrategy is reportedly facing a margin call after bitcoin fell below $21,000, though the company bought more bitcoin worth about $10 million this week.

Some analysts see $20,000 as a key psychological level for bitcoin, and said its drop below that could mean a further drop ahead. Crypto hedge fund boss Dan Morehead of Pantera Capital said there are "major meltdowns" to come, Bloomberg reported.

"It's getting very nervy in the crypto space and another significant break below here could bring fresh anxiety and more pain," Oanda's Craig Erlam said in a note about the $20,000 level.

Erlam added that it's hard to create much of a bullish case for bitcoin beyond its admirable resilience and wondered how long the enthusiasm of its backers can sustain its price.

Read more: $290 billion in market value has been shed in a widespread crypto selloff this past week. These 3 investment strategies will help your portfolio amid the industry's 'bloodbath', according to Fundstrat.

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