Bitcoin resumed its slide this week and the crypto winter is getting colder. More crypto funds and lenders are on the edge, while the stock market woes have weighed on Bitcoin and other cryptocurrencies, which have traded like speculative growth stocks.
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Bitcoin failed to hang onto $21,000 at the start of the week and briefly tumbled as low as $18,650 late Thursday. It quickly reclaimed $20,000 but fell to around $19,500 as of Friday evening.
The Bitcoin price hit an 18-month low near $17,600 on Saturday, June 18.
BTC bears have outweighed bulls the entire week. Crypto short interest has been greater than long interest, meaning more traders believe the price will go lower. Bitcoin has a Long/Short ratio of 0.98, according to CoinGlass data. In the past 24 hours, over $238 million in Bitcoin and Ethereum futures have been liquidated due to leveraged positions being unable to meet margin requirements.
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But it hasn’t been all bad news for digital assets. The European Union passed legislation to regulate crypto assets and services throughout its 27 nations. The policies require crypto issues to register with authorities and publish white papers — documents detailing the tech and purpose of the projects. The new law, called Markets in Crypto Assets (MiCA), also ensures exchanges maintain stablecoin reserves to prevent mass withdrawals.
While the industry generally chafes at regulations and compliance, the new rules could provide much-needed security and confidence.
In May, algorithmic stablecoin terraUSD and its sister coin LUNA collapsed, wiping out $40 billion in value. That sent shock waves of losses across crypto and turned some firms unsalvageable, like Three Arrows Capital which had exposure to LUNA.
Three Arrows Capital Liquidation
A British Virgin Islands court ordered Three Arrows Capital (3AC) to liquidate on Thursday after it defaulted on Bitcoin loans. The crypto hedge fund was unable to make payments on its 15,250 BTC and $350 million USDC loan from broker Voyager Digital (VYGVF). Based on BTC’s price, it was worth around $807 million at the beginning of June but only about $645.2 million at the time this report was written. 3AC also borrowed about $80 million from lender BlockFi, and its positions were liquidated after being unable to meet margin calls.
BlockFi Buyout
On Thursday, crypto exchange FTX signed a deal to bail out BlockFi. It includes an option to buy BlockFi at a maximum price of $240 million, based on performance triggers, BlockFi CEO Zac Price said in a tweet. FTX US will also provide a $400 million revolving credit facility to the digital asset lender. Things have gone from bad to worse for BlockFi. Last July it was valued at nearly $5 billion and was talking about going public. Now it’s valued around $500 million. Investment firm Morgan Creek Digital was also trying to raise $250 million to buy a majority stake in the company.
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Morgan Creek won’t be the only one upset by the deal. FTX was in talks with crypto lending platform Celsius. But FTX walked away due to a $2 billion hole in Celsius’ balance sheet, The Block reported. On June 12, Celsius froze withdrawals and transfers due to extreme market conditions, locking the funds of its 1.7 million users. It had around $12 billion in assets under management in May, the company said.
“We are focused and working as quickly as we can to stabilize liquidity and operations, in order to be positioned to share more information with the community,” Celsius published in a blog post on Thursday. The company says it’s taking steps to preserve assets and exploring options, such as pursuing strategic transactions and restructuring liabilities.
GBTC Rejection
Grayscale is suing the SEC after regulators rejected its bid to turn its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF. Greyscale originally filed to turn GBTC into an ETF in October 2021 but faced multiple delays in the ruling. The SEC cited concerns over potential market manipulation in its rejection on Wednesday. Grayscale said the SEC is being inconsistent by approving Bitcoin futures ETFs but denying ETFs that hold the same asset.
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On Wednesday, Meta (META) product manager Navdeep Singh announced the company is launching NFTs on Facebook. In a post, Singh shared images of a new ‘Digital collectibles’ tab on profile pages to showcase NFTs. Meta previously began tests to add NFTs to Instagram in May. In the post, CEO Mark Zuckerberg said the company plans to work on 3D NFTs for its augmented reality platforms. Meta also makes virtual reality headsets called Meta Masks, formerly known as the Oculus Quest.
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