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As The Crypto Crash Worsens, Here Are 4 Signs The Worst Could Be Yet To Come

Digital asset markets continued to crater on Wednesday, with bitcoin price BTCUSD,
+3.38%
testing a psychologically significant level of $20,000 – and there are few signs of respite for weary crypto traders.

Here are 4 signs that more trouble is ahead for the crypto markets:

1. Rumors have swirled about potential stress at influential hedge fund Three Arrows Capital, following a vague tweet from its founder Zhu Su on Tuesday night.

A major player in decentralized finance (DeFi) markets, a corner of the crypto world where traders often seek to make money on leveraged crypto and where so-called smart contracts can force liquidations in times of market stress, Su has publicly talked about his investments in a token called “staked ether”, which has been under severe strain in recent days.

On Wednesday, the Block reported that Three Arrows is “determining how to repay lenders and other counterparties following its liquidation by the space’s major lenders.” Zhu Su did not respond to a request for comment made by MarketWatch via Telegram.

Read more: Half Of Bitcoin Holders On Coinbase Exchange Could Suffer Losses, Says Mizuho

2. The most popular stablecoin in the world, tether USDTUSD,
+0.02%,
saw its dollar peg wobble again on Wednesday as traders continued to buy back their tokens in recent days.

In a blog post on Wednesday, Tether dismissed what it called “false rumors” regarding the reserve fund it keeps to back up the token and maintain the individual peg.

“Tether is aware of rumors that its commercial paper portfolio is 85% backed by Chinese or Asian commercial paper and is trading at a 30% discount,” the company said on its website.

“These rumors are completely untrue and are likely spreading to cause more panic to generate additional profits from an already stressed market,” he added. “Tether condemns such attempts which often see simple users take the biggest hit, while few coordinated funds increase their profits.”

Stablecoins are a type of cryptocurrency that seeks to maintain a one-to-one link with the US dollar DXY,
-0.21%,
and are used to protect crypto holdings from large fluctuations in the value of digital assets.

The crypto world was rocked in May when the algorithmic stablecoin TerraUSD broke its peg before the Terra blockchain was briefly halted, and the peg once deviated from its $1 peg on many exchanges, though the company denies that the dollar peg has been broken.

3. Another algorithmic stablecoin, Decentralized USD, which operates on the Tron network, has also seen its value drop below $1 in recent days, despite efforts to back it up with reserves of other cryptocurrencies, including Tether Circle’s USDC stablecoin and Tron’s TRX native token.

The Tron Dao Reserve, which oversees the stablecoin, said on Twitter on Wednesday that he withdrew hundreds of millions of dollars worth of TRX from his account at Binance “to protect the entire blockchain industry and crypto market.”

4. Crypto lender Celsius Network LLC reportedly hired restructuring attorneys from law firm Akin Gump Strauss Hauer & Feld LLP to advise it after the company told users it was suspending all withdrawals, trades and transfers between accounts, “due to extreme market conditions.”

According to Marc Arjoon, research associate at CoinShares, the situation at Celsius is seen as weighing on crypto prices, although it may have a bigger impact on sentiment rather than due to his direct crypto holdings. popular.

“I believe Celsius owns 0.7% of Bitcoin,” he told MarketWatch in a phone interview. Celsius announced in April that it held over 150,000 bitcoins. The cryptocurrency currently has a circulating supply of around 19 million, while its supply cap stands at 21 million.

“I think it could be serious for Celsius, but I don’t think it’s an existential threat to crypto markets,” Arjoon said.


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Post expires at 3:11am on Sunday June 26th, 2022