Bitcoin (BTC) Posts Worst Quarter in Over a Decade: 5 Causes Why

1. Macroeconomic pressure

During the quarter, the US Federal Reserve made two strong interest rate hikes to combat rampant inflation. That has raised fears of a recession in the US and other countries.

It has also affected stocks, especially highly developed technology name. The tech-heavy Nasdaq Composite fell 22.4% in the second quarter, worst quarterly performance since 2008.

Bitcoin is strongly correlated with the price movements of US stock indices. The stock sell-off affected bitcoin and the crypto market as investors sold off risky assets.

2. The Fall of TerraUSD

This episode resonated in the industry and had a dramatic impact, most notably on crypto hedge fund Three Arrows Capital, which had exposure to terraUSD (see more on this below).

3. Lender Celsius suspends withdrawals

Cryptocurrency Lenders C has suspended withdrawals for customers in June.

The company has offered users a yield of more than 18% if they deposit crypto in Celsius. It then lends money to crypto market players who are willing to pay high interest rates to borrow money.

But the price drop put that model to the test. Celsius cited “extreme market conditions” as the reason for halting withdrawals.

On Thursday, Celsius said in a blog post that it is taking “important steps to preserve and protect assets and explore the options available to us.”

These options include “pursuing strategic transactions as well as restructuring our debt, among other ways.”

The problems with Celsius have shown weakness in many of the lending models used in the cryptocurrency industry that offer users high yields.

4. Three arrows Liquidation of capital

Three Arrows Capital is one of the most prominent hedge funds focusing on cryptocurrency investment.

The decades-old company, also known as 3AC, founded by Zhu Su and Kyle Davies, is known for its highly leveraged bullish bets in the cryptocurrency market.

3AC exposed the algorithmically crashed stablecoin terraUSD and sister token luna.

The Financial Times Last month reported that US-based crypto lenders BlockFi and Genesis had liquidated some of 3AC’s positions, citing people familiar with the matter. 3AC borrowed from BlockFi but was unable to meet the margin call.

A margin call is a situation in which an investor must commit more funds to avoid a loss on a trade made with borrowed money.

afterward 3AC is insolvent over $660 million from Voyager Digital.

As a result, Three Arrows Capital fell into liquidationa person with knowledge of the matter told CNBC this week.

The 3AC situation shows the highly leveraged nature of business in the industry in recent times.

5. CoinFlex-‘Bitcoin Jesus’ spit

Cryptocurrency exchange CoinFlex halted customer withdrawals last month, citing “extreme market conditions” and negative customer accounts’ equity.

CoinFlex claims that the customer, who it alleges is well-known crypto investor Roger Ver, owes the company $47 million. Ver, who was nicknamed “Bitcoin Jesus” because of his viral views on the industry in its early days, denied that he owed CoinFlex money.

Normally, an account with negative equity will be liquidated, the exchange said. But CoinFlex and Ver had an agreement not to allow this to happen.

CoinFlex released a new token called Recovery Value USD or rvUSDraised $47 million to be able to continue withdrawing and is offering 20% ‚Äč‚Äčinterest to investors willing to buy and hold the digital currency.

CEO Mark Lamb told CNBC this week that the company is talking to a difficult debt fund number to buy tokens. CoinFlex is also looking to withdraw funds from Ver.

Leave a Comment