In the early hours of Tuesday morning, Bitcoin's price fell below $21,000 (£17,000), as the cryptocurrency market continues to struggle in the wake of loan site Celsius halting all withdrawals and transfers on its platform. Although the world's most valuable cryptocurrency has recovered slightly, going back to roughly $22,600 (£18,600), it is still down nearly 10% in the last 24 hours. On Monday, Binance briefly banned Bitcoin withdrawals due to a drop in the price of the cryptocurrency. Bitcoin has already lost about a third of its value in the last week, and it is now worth less than a third of its November peak. Other coins have experienced a similar drop in value as a result of the Celsius incident. Ethereum is currently selling at $1,230 (£1,000), down from $1,840 (£1,500) just a week ago. Some smaller currencies, such as Cardano, Solana, and Polkadot, have seen small gains in the previous 24 hours - they are all up at least 10% – but are still significantly below last week's pricing.
Here's everything you need to know about the crash, as well as what experts believe will happen next.
What caused Bitcoin's demise?
Celsius is a cryptocurrency lending platform that allows users to lend out their tokens in exchange for high fixed cash returns on their deposits. It presently has roughly $8 billion (£7 billion) in loans to its customers. The platform announced on Monday that it would be pausing all withdrawals, swaps, and transfers between accounts" in order to be "in a better position to honor its withdrawal obligations over time. It stated it was taking the action to "help our entire community by stabilizing liquidity and operations while we retain and protect assets.
However, the decision has raised concerns about Celsius's liquidity, and in recent weeks, investors have begun departing the platform. Since October, when it was handling $26 billion (£21 billion) in customer funds, the value of Celsius's assets has more than half.
It comes following the recent collapse of Terra's Luna coin, which had a big impact on the crypto sector. The halting of transactions has also intensified a cryptocurrency sell-off. This year, the general sentiment toward cryptocurrency has cooled. In the face of global inflation, investors appear to be migrating away from bitcoin and into less hazardous options.
Cryptocurrency has a lot more to offer. Will Bitcoin make a comeback?
Bitcoin, according to Rich Blake, a financial expert at Uphold, is on the verge of collapsing.
"Crypto enters the week somewhat subject to stock market whims, plainly on pins and needles over May inflation statistics - the US Consumer Price Index (CPI) report was released on Friday. He stated, "It's the bottom line; not what anyone wanted to hear."
"Economists predicted an increase in the CPI of 8.3% year over year, while the headline inflation rate came in at 8.6%. Wall Street was on the lookout for signs that inflation had reached a nadir.
"Bitcoin was fighting to stay above $30,000 minutes before Friday's CPI announcement." It had been under $29,000 for several hours and appeared to be on the edge of failing. The threat of an approaching 'crypto winter' now hangs in the balance."
"Going into 2023, we expect major central banks to continue their trajectory of quantitative tightening and policy rate hikes - effectively restricting any big upside unless we see more convincing patterns in economic recovery," the CoinDCX research team told Business Today.
Other experts, on the other hand, are optimistic about the future of cryptocurrency.
"What I foresee from Bitcoin is volatility short-term and growth long-term," said Danial, founder of Invest Diva and author of Cryptocurrency Investing For Dummies.
Last Monday, PWC, a Big Four accounting firm, released its fourth annual worldwide crypto hedge fund report.
While the broader crypto market was negative, the results showed that "managers were exceptionally positive on BTC," with 42% anticipating a price of $75-100,000 (£62,000-£83,000) by the end of 2022, and 35% predicting a price of over $50,000 (£41,000).
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