Digital asset markets continued to fall on Wednesday, with the price of bitcoin BTCUSD,
testing a psychologically significant $20,000 level, and there is little sign of respite for weary crypto traders.
Here are 4 signs that more trouble is ahead for the crypto markets:
1. Rumors swirled about potential stress at influential hedge fund Three Arrows Capital, following a vague tweet from its founder Zhu Su on Tuesday night.
A major player in decentralized finance (DeFi) markets, a corner of the crypto world where traders often look to make money from leveraged cryptocurrencies and where so-called smart contracts can force liquidations in times of market stress, Su has stated publicly He talked about his investments in a token called “stake ether,” which has come under pressure in recent days.
On Wednesday, Block reported that Three Arrows is “in the process of figuring out how to pay lenders and other counterparties after it was liquidated by top-tier loan firms in the space.” Zhu Su did not respond to a request for comment by MarketWatch via Telegram.
read more: Half of bitcoin holders on Coinbase exchange may face losses, says Mizuho
2. The most popular stablecoin in the world, tether USDTUSD,
saw its peg to the dollar falter again on Wednesday as traders continued to redeem their tokens in recent days.
In a blog post on Wednesday, Tether dismissed what it called “false rumours” about the reserve fund it maintains to back the token and maintain the one-to-one peg.
“Tether is aware of rumors spreading that its commercial paper portfolio is 85% backed by Chinese or Asian commercial paper and is trading at a 30% discount,” the company said on its website.
“These rumors are completely false and are likely to be propagated to induce more panic in order to generate additional profits from an already stressed market,” he added. “Tether condemns such attempts which often see simple users taking the biggest hit, while few coordinated funds increase their profits.”
Stablecoins are a type of cryptocurrency that seeks to maintain a one-to-one peg to the US dollar DXY,
and are used to protect cryptocurrency holdings from large swings in the value of digital assets.
The cryptocurrency world was rocked in May when the TerraUSD algorithmic stablecoin broke its parity before the Terra blockchain briefly ground to a halt, and Tether once deviated from its $1 parity on many exchanges, though the company denies that the dollar parity was broken.
3. Another algorithmic stablecoin, Decentralized USD, which operates on the Tron network, also saw its value fall below $1 in recent days, despite efforts to back it with reserves of other cryptocurrencies, including stablecoin USDC from Tether Circle and the native token TRX from Tron.
The Tron Dao Reserve, which oversees the stablecoin, he said on Twitter on Wednesday that he had withdrawn hundreds of millions of dollars worth of TRX from his Binance account “to safeguard the blockchain industry and the crypto market in general.”
4. Crypto lender Celsius Network LLC reportedly hired restructuring attorneys from law firm Akin Gump Strauss Hauer & Feld LLP to advise it after the company told users it was pausing all withdrawals, trades, and transfers between accounts, “because to extreme market conditions. ”
The situation in Celsius is seen as weighing on crypto prices, though that could be more due to its impact on sentiment than its direct holdings of popular cryptocurrencies, according to Marc Arjoon, research associate at CoinShares.
“I think Celsius holds 0.7% of Bitcoin,” he told MarketWatch in a phone interview. Celsius announced in April that he owns more than 150,000 bitcoins. The cryptocurrency currently has a circulating supply of around 19 million, while its supply cap is 21 million.
“I think it could be serious for Celsius, but I don’t think it’s an existential threat in any way to the crypto markets,” Arjoon said.