Bitcoin (BTC) declined below the $19,000 level once again this week as the current macroeconomic environment and troubled crypto firms continue to take a toll on digital currencies.
As a result, shares of Coinbase (NASDAQ: COIN), MicroStrategy (NASDAQ: MSTR), and Block (NYSE: SQ) are all trading under pressure this week given their exposure to the digital asset ecosystem.
Bigger Fall Needed Before Bottom is In?
The world’s largest cryptocurrency slipped below $19,000 this week as investors continue to sell high-growth assets. Bitcoin remains down over 60% since the start of the year and has plunged over 70% from its all-time high of nearly $69,000 it touched last November.
“Bitcoin continues to be under pressure as other assets are. The mix of high inflation, rising interest rates and recession weigh on cryptocurrencies,” Yves Longchamp, SEBA Banks’s head of research.
Some crypto experts believe Bitcoin will dip below $15,000 in July before eventually bottoming out and following equities in turning higher.
The current economic challenges have weighed on all financial markets in the past several months, with the benchmark S&P 500 heading for its first half of the year in more than 50 years. The correlation between Bitcoin and stock indexes has become closer recently, particularly the tech-weighted Nasdaq. Equity prices have been battered in 2022 which has additionally affected Bitcoin.
Furthermore, many investors and analysts are fearing that the U.S. and global economy could fall into a recession as central banks around the world continue to aggressively hike interest rates to curb the record-high inflation.
The crypto drawdown has been exacerbated after high-profile crypto firms started reporting significant liquidity issues. Crypto hedge fund Three Arrows Capital went into liquidation earlier this week after the crash of algorithmic stablecoin TerraUSD (UST) last month and its sister token LUNA, to which the firm was exposed to. As a result, the reports said that the hedge fund has failed to address the margin call from crypto lender BlockFi.
A margin call is when an investor is required to top up their accounts to avoid sustaining damage from losing trades they made using borrowed capital.
Similarly, digital asset exchange CoinFlex announced last week it has temporarily halted withdrawals for customers due to “extreme market conditions.” The company’s chief executive Mark Lamb also said that the famous crypto investor Roger Ver owes CoinFlex $47 million. Ver denied the claims.
To address the $47 million loss, Lamb said CoinFlex is planning to roll out a new coin and is already in talks with multiple well-known hedge funds that have expressed interest in purchasing the token.
Withdrawals for customers were initially planned to resume on Thursday but will remain frozen until further notice.
“In this environment, pressure on bitcoin and other crypto assets remain,” Longchamp added.
Coinbase Resumes Expansion Despite Macro Headwinds
On a more positive note, crypto exchange Coinbase said Thursday it is considering expanding into the European markets despite the current crypto market turmoil.
Coinbase’s VP of Business Development and International, Nana Murugesan, told Bloomberg the company has already started the registration processes in multiple European countries including Spain, the Netherlands, and France.
While the crypto exchange already has a footprint in Europe and is already registered with regulators in the U.K, Germany, and Ireland, it has also hired its first employee in Switzerland.
The company aims to “have retail and institutional products” in these markets, adding that it is “an existential priority” for the company to ensure that it can fulfill its mission by expanding into new locations.
Coinbase is also in pursuit of new acquisition targets as the ongoing market drawdown continues to reduce crypto firms’ valuations.
But the company itself has faced numerous challenges this year amid the current turmoil. It has recently reduced 18% of its global workforce and recalled multiple job offers.
Among other decisions, Coinbase has recently introduced its first Bitcoin derivatives product and has closed its professional trading marketplace, Coinbase Pro, as it plans to bring all services to its regular Coinbase platform.
Bitcoin price is trading lower again this week as macro headwinds intensify amid extreme tightening actions by global central banks. As a result, shares of crypto-linked companies are also under pressure and near multi-year lows.