Bitcoin Plunges Below $17,800 as Selloff Accelerates Here’s What Happened

Bitcoin plunged to $17,749 and Ether fell to $897 around 4:15 a.m. ET on Saturday afternoon as the sell-off in the crypto market accelerates. The world’s two most popular cryptocurrencies have fallen more than 35% over the past week as both broke symbolic price barriers.

Bitcoin peaked at $68,789.63 in November and last traded at this low around November 2020.

The carnage in the crypto market is being caused in part by pressure from macroeconomic forces, including rising inflation and a string of Fed rate hikes. We’ve also seen these blue chip cryptos tracking stocks lower. It doesn’t help that crypto firms are laying off large numbers of employees and some of the industry’s most popular names are facing a solvency collapse.

That’s how we came here.


Celsius CEO Alex Mashinsky.

Piaras Ó Midheach | Sportsfile for Web Summit | Getty Images

The week started with a tumble in crypto prices, with Bitcoin falling as much as 17% at one point during the day. It seemed like crypto winter was here.

In the chaos, Celsius, a major crypto staking and lending company, shocked the market when it announced that all withdrawals, exchanges, and transfers between accounts were suspended due to “extreme market conditions.” In a memo addressed to the Celsius community, the platform also said the move was designed to “stabilize liquidity and operations.”

Celsius has effectively frozen its $12 billion in crypto assets under management, raising concerns about the platform’s solvency. The news spread across the crypto industry, reminding some of what happened in May when a failed US dollar-pegged stablecoin project lost $60 billion in value, dragging the entire crypto industry with it.

Celsius was known for offering users a return of up to 18.63% on their deposits. It’s like a product a bank would offer, only without the regulatory protections.

Those crazy high yields were what eventually came under scrutiny.

“This risk certainly appears to be just the beginning,” said John Todaro, Needham’s vice president of crypto assets and blockchain research.

“What I would say is on the decentralized side – a lot of these DeFi protocols, a lot of these positions are over-collateralised, so you shouldn’t quite see the under-funding situation that centralized borrowers and lenders could be experiencing. But that aside, you could still see a lot of liquidations selling this collateral on DeFi protocols,” Todaro continued.


People watch as the logo of Coinbase Global Inc, the largest U.S. cryptocurrency exchange, is displayed at the Nasdaq MarketSite’s jumbotron in Times Square in New York, the United States, April 14, 2021.

Shannon Stapleton | Reuters


MicroStrategy Chairman and Chief Executive Officer Michael Saylor first came into contact with Bitcoin in 2020 when he decided to add the cryptocurrency to MicroStrategy’s balance sheet as part of an unorthodox treasury management strategy.

Eva Marie Uzcategui | Bloomberg | Getty Images

MicroStrategy CEO Michael Saylor appeared on CNBC Wednesday morning to address concerns surrounding his firm making a $4 billion bet on Bitcoin. Saylor said the company is the first and only Bitcoin spot exchange-traded fund in the US, making an investment in MicroStrategy the closest thing to a Bitcoin spot ETF.

MicroStrategy has used corporate debt to buy bitcoin, and in March Saylor decided to take another step towards normalizing bitcoin-backed funding when he borrowed $205 million using his bitcoin as collateral — only to then borrow more of the cryptocurrency to buy.

“We have $5 billion in collateral. We borrowed $200 million. So I’m not telling people to go out and take out a heavily leveraged loan. I think I’m doing my best to go ahead and normalize the Bitcoin-backed funding industry,” said Saylor, adding that publicly traded crypto miner Marathon Digital also has a line of credit with Silvergate Bank.

As bitcoin prices plummeted this week, investors feared the company would be asked to post more collateral on its loan, but Saylor said fears were overblown.

“The margin call is much ado about nothing,” Saylor told CNBC earlier this week. “It just made me famous on Twitter so I appreciate that… We feel like we have a fortress balance sheet, we’re comfortable and the margin loan is well managed.”

Then on Wednesday afternoon, the US Federal Reserve raised interest rates by three-quarters of a percentage point, the most aggressive hike since 1994. The Fed said it did so in an effort to curb skyrocketing inflation.

Crypto prices initially rallied on the news as investors hoped we could avoid a recession, but this rally was short-lived.


Bitcoin and other cryptocurrencies are in free fall.

Dan Kitwood | Getty Images

Friday into Saturday

Bitcoin and other cryptocurrencies fell sharply as investors dump risky assets. A crypto lending company called Celsius is pausing withdrawals for its customers, raising fears of contagion in the broader market.

Nurphoto | Nurphoto | Getty Images

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