Bitcoin yesterday plummeted to a low of 17,500 USD and then returned to around 19,000 USD. Altcoins fell sharply. Many small altcoins have dropped more than 90% from their peak.
This drop caused BTC price to drop below its old 2017 peak, something that has never happened before or after the bull season. Many investors panicked when the price dropped. The Fear and Greed Index has dropped to 6. It’s been a long time since August 2019 when the index has fallen to this level.
The price of two major coins BTC and ETH plummeted, causing many rumors about the company 3 Arrows Capital (3AC) having liquidated a large amount of ETH on mortgage lending applications. Twitter That Martini Guy shared that when BTC fell below $1,016, the amount of ETH that was collateralized was liquidated. The number of liquidations is up to 191 million USD worth of ETH (Twitter ADAape shared). An account on Twitter shared that 3AC also sold off all shares of Grayscale company (GBTC). In addition, 3AC has more than 151,101 ETH at risk of being liquidated if the price continues to fall. The company hasn’t had any updates yet for users, so more and more different information spreads. But the current situation can see 3AC having real financial problems.
3AC is likened to the moment of Lehman Brother crypto version. In the past, almost very few people knew about 3AC company. But through this incident, almost everyone knows the name of this company, including outsiders.
The Celsius company has not had any further updates since June 17. Only a few shared updates that they are trying to resolve the issue. Some data share this company is constantly transferring more BTC to reduce the liquidation price. It is hypothesized that someone really wants to liquidate Celsius’s collateralized BTC so they want to push the price of BTC down to the price of collateralized BTC.
The day before that, famous crypto YouTuber Ben Armstrong wanted to sue Celsius. However, he updated that he will not sue because the probability of winning is very low. In addition, Ben Armstrong was also a promoter of Celsius, so there may be questions about conflicts of interest. Therefore, he will not lead the class action and will participate as a victim if someone leads the case.
Besides the selling force coming from 3AC or Celsius, the important group is that most of the miners suffered losses and were under similar pressure. Most of the old technology miners are losing money, only a few miners are profitable.
Therefore, miners need to sell BTC to have operating costs, especially small miners. There are signs of BTC being pushed onto the exchange from miners’ wallets in recent days.
As can be seen, companies like 3AC or Celsius as well as many others are too dependent on the bull market. The way they manage capital, poor cash flow has led to a loss of liquidity when the market plummeted. The insolvency of 3AC poses a risk to the entire crypto market and could be the first pill for a domino effect to affect the entire market. Company 3AC can borrow money from many other companies such as FTX, Celsius, BlockFi, and BitMex, etc., so this incident could affect a wide range of other companies involved.
The first affected companies have appeared. Babel Finance Company announced to suspend withdrawals due to liquidity pressure. Finblox announced that 3AC is one of their investors and partners. 3AC is having problems, so this company temporarily stops paying interest and does not accept new customers. Currently, Finblox still supports withdrawals but can only withdraw within a limit of 1500 USD/month.
What happened in the past is unexpected. However, it also shows that market establishment is essential to ensure the long-term sustainability of crypto. Governments also see the need to properly understand and legislate to regulate markets. The upside of having clear regulation is that it helps promote market development.
It also helps us to see which projects or coins can stay in the market and which coins are the mainstays. Over the years, Bitcoin has been “dead” many times but still exists and the long-term trend is up to this day. After each cycle, we see the lowest low gradually increase indicating that the market is more mature and more people believe. Investors in the market also learn many different lessons from the market. Those who believe in BTC and the crypto market will continue to stay. The down price is an opportunity to accumulate and wait for opportunities when the market grows again.
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