Bitcoin stays above $20,000 after week of forced crypto selloff

Bitcoin rose 1.6% in Asia, the first signs of recovery from last week’s rout.

The cryptocurrency is showing early signs of recovery from last week’s slump as Bitcoin holds above $20,000.

Bitcoin rose 1.6 percent in Asia on Tuesday to trade at $20,665 as of 8:42 a.m. in Tokyo. The MVIS Cryptocompare Digital Asset 100 Index rose 1.5%. So-called altcoins like Solana and Polkadot are the winners.

After a volatile week for Bitcoin to drop below the $20,000 level for the first time since 2020, some market watchers are pointing to signs that prices may have bottomed — at least for now. The actual loss of bitcoin holdings hit a record $7.3 billion last week, Glassnode said in a report on Monday.

“As forced sellers appear to have driven the bulk of sellers in the near term, the market may begin to focus on whether there are signs of seller exhaustion in the weeks and months ahead,” the report said.

GlobalBlock analyst Marcus Sotiriou pointed to Glassnode data that “a macro bottom or an interim bottom may be close,” according to a report on Monday. Altcoins do not suffer from the same “liquidation cascade” as bitcoin and ether, tokens primarily used as collateral for leveraged positions, he said.

Any market recovery could be fleeting, with central banks around the world working to drain liquidity to fight runaway inflation.

The T3 Bitcoin Volatility Index, a measure of a token’s expected 30-day volatility, has recovered to its mid-May highs, when the TerraUSD stablecoin’s collapse shook the market.

Cameron and Tyler Winklevoss’ head of Asia-Pacific trading for the Gemini crypto platform, Feroze Medora, said in a statement on Monday.

Glassnode said Bitcoin has now gone through two “different phases of capitulation” since peaking near $69,000 in November. The first was sparked by the crash of the TerraUSD stablecoin in early May, while the crash over the past week was driven by “massive on-chain and off-chain de-leveraging across the industry.”

Chiente Hsu, CEO of decentralized finance platform ALEX, said current trading patterns for bitcoin and ether suggest that some large cryptocurrency holders are “chasing liquidation to profit by forcing other participants to exit.”

Adding to the uncertainty is the enormous pressure on DeFi applications. When pandemic-era stimulus fueled a record cryptocurrency boom, their popularity as a source of high yields soared.

Now they are forced to take unprecedented steps to protect themselves from the knock-on effects of liquidation. Troubled crypto lending platform Celsius Network Ltd. said on Monday that it needed more time to stabilize its liquidity and operations after freezing deposits in early June.

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