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Bitcoin Price Drops Towards $20,000 As Cryptocurrency Rout Deepens

Bitcoin avoided a drop below $20,000, supported by a market rally after the Federal Reserve approved its biggest interest rate hike since 1994.

Bitcoin settled at $21,685.02 on Wednesday, down 1.4% from its 5 p.m. price on Tuesday, according to Dow Jones Market Data. In the morning, it was trading as low as $20,111, threatening to fall below $20,000 for the first time since December 2020.

However, it remains down about 68% from its high of $67,802.30 reached in November 2021.

The cryptocurrency rout wiped out roughly 1.5 years of gains for bitcoin, which began to soar in late 2020 as speculative fervor swept through financial markets.

Since late last year, the air has been blowing out of cryptocurrencies as investors retreat from riskier assets in anticipation of an end to easy money market conditions.

Two high-profile incidents in the past few weeks have accelerated the fall of cryptocurrencies. In May, the collapse of stablecoin TerraUSD and its sister token Luna caused a massive sell-off in cryptocurrencies. Then on Sunday, Celsius Network, one of the biggest crypto lenders, said it was suspending all withdrawals, trades and transfers, causing further panic.

The price of ether, the home currency of the Ethereum network, fell 0.8% to $1,177.44 from its level at 5 p.m. ET on Tuesday, after trading at $1,013 on Wednesday. Most other cryptos, however, have gone up. Of the top 30 tracked by CoinDesk, 26 were rising late Wednesday afternoon.

The pain in the cryptocurrency markets has been wide. The price of ether, the home currency of the Ethereum network, fell as low as $1,013 on Wednesday and was most recently at $1,080, down 9% from its level at 5 p.m. ET on Tuesday. Cardano’s ada token and even the dogecoin cryptocurrency joke have slipped. Of the top 30 tracked by CoinDesk, 29 were down as of Wednesday afternoon.

The latest sign of stress and confusion came from a vague tweet from the co-founder of Three Arrows Capital, a hedge fund that has invested heavily in cryptocurrencies. “We are in the process of communicating with the parties concerned and we are fully committed to resolving this issue,” the tweet said. No other details were provided. Three Arrows did not respond to a request for comment.

Sell-offs continued to hit major U.S. stock indices, with the S&P 500 entering bearish territory on Friday for the first time in more than two years. Caitlin McCabe of the WSJ examines some of the main causes of market volatility. Photo: John Minchillo/Associated Press

The fall of cryptocurrencies coincides with a massive sell-off on the stock exchange. Earlier this week, the S&P 500 entered a bear market, defined as a decline of 20% or more from a recent high.

Losses have accelerated in recent days after stronger-than-expected inflation data for May sparked concerns that the Federal Reserve needs to raise interest rates more aggressively. On Wednesday, the Fed approved an interest rate hike of 0.75 percentage points and signaled that it would continue raising rates this year at a rapid pace.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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Appeared in the June 16, 2022 print edition as “Bitcoin Falls, Stays Over $20,000”.


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Post expires at 4:00pm on Monday June 27th, 2022