Bitcoin, Ether bounce off lows after record rout

Bitcoin plunged through several closely watched price levels to the lowest since late 2020 as evidence of deepening stress within the crypto industry keeps piling up against a backdrop of monetary tightening.

The largest digital token by market value tumbled as much as 15 per cent to US$17,599 on Saturday, marking a record-breaking 12th consecutive daily decline according to Bloomberg data.

It is still only the biggest drop since last Monday.

The currency recovered some of those losses and was trading at just above US$19,000 in Singapore yesterday evening.

Ether fell as much as 19 per cent to US$881, the lowest since January last year, before climbing more than 10 per cent to US$1,055 yesterday evening in Singapore.

The two bellwethers of the crypto market are both down more than 70 per cent from all-time highs set in early November.

"What we're seeing is more liquidations driving prices and sentiment lower, which triggers more liquidations and negative sentiment - some flushing-out needed still, but this will at some stage exhaust itself," said Ms Noelle Acheson, head of market insights at Genesis, one of the largest and best known lenders in the digital assets space.

Total liquidations in the crypto market were US$566.7 million (S$790 million) in the past 24 hours, with Bitcoin and Ether at around US$271 million and US$192 million respectively, according to data from Coinglass.

The latest fall in value pushed Bitcoin below US$19,511, the high the coin hit during its last bull cycle in 2017, which it reached at the end of that year.

Throughout its roughly 12-year trading history, Bitcoin has never dropped below previous cycle peaks.

Altcoins were no exception to soured investor appetite in the wake of Bitcoin's fall, with every token on Bloomberg's cryptocurrency monitor trading in the red.

Cardano, Solana, Dogecoin and Polkadot recorded falls of between 12 per cent and 14 per cent, while privacy tokens such as Monero and Zcash lost as much as 16 per cent.

A toxic mix of bad news cycles and higher interest rates has been deleterious to riskier assets like crypto.

The United States Federal Reserve raised its main interest rate last Wednesday by three-quarters of a percentage point - the biggest increase since 1994 - and central bankers signalled they will keep hiking aggressively this year in the fight to tame inflation.

"Investors are continuing to position defensively following last year's liquidity-driven digital asset bull market," Mr Alkesh Shah, head of crypto and digital assets strategy at Bank of America, said in a note last Friday.

"Although painful, removing the sector's froth is likely healthy as investors shift focus to projects with clear road maps to cash flow and profitability versus purely revenue growth."

Broader signs of stress emerged with last month's collapse of the Terra blockchain, and worsened this week following crypto lender Celsius Network's recent decision to halt withdrawals.

Adding to the mood, crypto hedge fund Three Arrows Capital suffered large losses and said it was considering asset sales or a bailout, while another lender, Babel Finance, followed in Celsius's footsteps on Friday.

Bitcoin may "build a base around US$20,000 as it did at about US$5,000 in 2018-19 and US$300 in 2014-15", Mr Shah said in a note on Wednesday.

"Declining volatility and rising prices are earmarks of the maturing digital store-of-value."

The crypto market now stands at a fraction of its heights late last year, when Bitcoin traded near US$69,000 and traders poured cash into speculative investments of all stripes.

The total market cap of cryptocurrencies was around US$881 billion yesterday, down from US$3 trillion last November, according to pricing data from CoinGecko.

BLOOMBERG