Historic price slump: Why does Bitcoin keep collapsing?

Bitcoin price fell below $20,000 this morning.

The rising interest rate pressure and the failure of various companies can be identified as the reason for the slump.

In addition, the weekends are characterized by low liquidity, which makes it easier for the bears to depress the price.

The magic mark of $20,000 has fallen and Bitcoin has recorded a historic price drop. Because so far the low after a bull market has never fallen below the high from the previous one. This breaks the previous pattern of recurring cycles, which produce a bull market every 4 years, at least in this respect.

At the time of writing, BTC is around $19,000, below the 2017 high. This only makes further falls more likely, reducing expectations and price targets. While some analysts believe that a bottom can be found around $13,000, the situation is crying out for a rebound.

Eventually, neither a short squeeze nor a bear market rally materialized, and the price has been falling since June 9th without much of a correction.

Crypto industry is shrinking tremendously

The slump also appears to have caught crypto hedge fund Three Arrows Capital off guard. According to several consistent media reports, 3AC's positions have been liquidated. Accordingly, the company is said to have gambled away in such a way that it is threatened with bankruptcy. Other companies linked to 3AC, such as derivatives exchange Deribit, assured that the situation has no impact on their business.

Overall, one gets the impression that the Celsius crisis and the resulting price slumps have had a painful impact on companies active in the market. There was also a wave of layoffs at stock exchanges and brokers, which leaves a particularly bitter aftertaste. Coinbase is said to have laid off employees practically overnight in order to reduce the workforce by 18%.

Why does the market keep falling?

For one, rate hikes by the Fed and other central banks are having a sensitive impact on the market. Another problem is the unclear situation of Celsius, because in the event of insolvency, the market is threatened with the next meltdown immediately after Terra.

In the current situation, it is only likely that more and more investors will sell their coins and tokens or will have to sell some of them. This is particularly the case for any fund that relies on liquidating assets for cash. The ever-increasing pressure to sell can eventually lead to cascading liquidations and thus to further price slumps. In principle, this spiral can only be stopped if demand rises drastically or the majority has been liquidated.

This effect is particularly problematic on weekends, because then there is less liquidity in the market. Therefore, the crypto market is currently in an extremely difficult situation because there is a lack of buyers.