Bitcoin and Ethereum slumped below $18,000 and $1,000 respectively; Celsius Network and Three Arrows Capital were on the brink of insolvency, USDD lost parity with the US dollar, and other events from the week.
Bitcoin price breached $18,000; Ethereum — $1,000
Bitcoin opened the week with a drop. On June 13 its price moved below $23,000, and on Saturday breached the $20,000 level, testing a range under the $18,000 mark.
Ethereum’s quotes also fell over the week. On June 18 the asset’s price at one point slid to $881 (on Binance).
At the time of writing, Bitcoin was trading near $19,600 and Ethereum around $1,060.
The flagship assets pulled the rest of the market down — its capitalization fell below $1 trillion. All the largest digital assets finished the week in the red.
And the Fear and Greed Index collapsed to panic readings at 8 points, comparable to March 2020 levels and Black Thursday.
The week on US stock markets opened with a pronounced drop in shares of crypto-focused companies: MicroStrategy, Coinbase, Silvergate Capital and others.
Because of Bitcoin’s slump, MicroStrategy’s paper loss exceeded $1 billion, and El Salvador’s stood at $56 million. Yet Michael Saylor said that in choosing a strategy for investing in digital gold his analytics software provider anticipated volatility. He assured that the company would continue to hold crypto.
The leading OTC platform Cumberland said that the off-exchange desk is currently seeing “the largest flows of the year,” though it did not rule out further market declines due to potential collapse of another major stablecoin.
According to Glassnode, fundamentals deteriorated, and even long-term holders are now bearing sizable losses. Investors’ net realized losses amounted to a record $4.2 billion.
Coin Metrics noted that during the sell-off miners sent a record 88,000 BTC to crypto exchanges.
The market’s fall hit Celsius, the lending platform
On June 13 the Celsius lending platform suspended withdrawals, exchanges and transfers between accounts “due to extreme market conditions.” The project’s token fell by 50%.
Experts say the decision might have been driven by losses from using high-risk DeFi instruments, notably synthetic assets backed by stETH from Lido and Wrapped Bitcoin. Another large portion of the platform’s funds is blocked in the Ethereum 2.0 deposit contract and remains illiquid until the move to Proof-of-Stake (PoS).
Nexo said it was ready to buy Celsius’s loan portfolio. On June 15 the CEL token rose more than 50% on news of the company strengthening its debt positions.
Online reports also stated that Celsius hired Citigroup to explore financing options, while major investors did not express willingness to rescue the company. Regulators in five states reportedly began investigations into the incident.
Three Arrows Capital also felt the squeeze
The Singapore-based hedge fund Three Arrows Capital (3AC) — a major investor in leading industry projects — also began liquidating assets to cover obligations. In particular, the fund started converting stETH amid Ethereum’s drop to $1,000 toward the liquidation price on the Aave protocol.
Co-founder Su Zhu commented on the situation ambiguously, and online speculation about the firm’s insolvency began. Meanwhile, the head of 8 Blocks Capital, Danny Yuan, said that 3AC used $1 million of funds from his company’s accounts to cover margin calls.
It is also known that in the past the fund led a $1 billion Terra funding round and, in late 2021, was among the largest holders of Grayscale shares, which could indicate substantial losses.
BlockFi, the lending platform, said that 3AC’s positions were liquidated. Later it emerged that the list of platforms expanded to include BitMEX, FTX, Deribit and Bitfinex. The hedge fund’s scale created uncertainty in its operations that affected other projects like the staking platform Finblox. Some participants funded by 3AC said that it no longer manages their assets.
Tether noted that although Celsius is part of its investment portfolio, the negative events did not affect the financial stability of the issuer of the stablecoin USDT. Rumors of lending to the Three Arrows Capital fund were described as inaccurate. At the same time Tether denied speculation about dominance in the reserves of Chinese commercial papers.
At the end of the week co-founder Kyle Davies said the fund was exploring asset sales and “financial assistance” from other companies, and was trying to negotiate with creditors for debt relief.
At week’s end Babel Finance, one of the largest crypto lenders and asset managers in Asia, also said it faced liquidity shortages due to market volatility and suspended payouts and withdrawals from its own products.
What about stETH from Lido?
As a result of liquidations of stETH positions by major crypto investors like Alameda, 3AC and Celsius, the synthetic asset lost its peg to Ethereum. By Friday 1 stETH was offered for only 0.935 ETH.
Since May the total value of assets in the ETH/stETH liquidity pool of Curve has fallen from about $4.5 billion to around $620 million. Price pressure is also driven by pool imbalance: roughly 111,300 ETH backing about 491,000 stETH.
Stablecoin USDD briefly lost parity with the US dollar. Tron DAO undertook unsuccessful stabilization attempts
On June 13 the algorithmic stablecoin USDD from Tron briefly lost parity with the US dollar and fell to $0.97. The reserve-backed Tron DAO allocated 700 million USDC to defend the peg, but this did not help — by June 15 the price had dropped to $0.95.
Experts were concerned by the DAO’s activity — converting reserves into volatile assets amid a market downturn and a drop in the stablecoin’s annual deposit rate from 30% to 10.9%.
The USDN from Waves also slumped significantly (on June 15 it fell to $0.76). Subsequently, the South Korean exchange Upbit issued a warning to users about risks linked to algorithmic stablecoins.
As the market declined, Tron DAO said it would withdraw 2.5 billion TRX from Binance “to safeguard the blockchain industry and the crypto market.” Later the organization announced a further 3 billion coins would be withdrawn.
What to discuss with friends?
- Binance will restrict deposits and withdrawals of Litecoin using the MimbleWimble privacy feature.
- The founder of BlockTower Capital assessed Bitcoin’s survivability by drawing on the dot-com era.
- Ukraine launched a token backed by bonds.
- Elon Musk, SpaceX and Tesla were sued for $258 billion over Dogecoin promotion.
Mass layoffs amid crypto winter
The trend toward mass layoffs is gathering pace. This week Crypto.com CEO Kris Marszalek announced a restructuring that will see 260 employees leave, or about 5% of the workforce.
Because of deteriorating market conditions, Coinbase will cut about 18% of its staff, according to CEO Brian Armstrong. Crypto lending platform BlockFi announced layoffs of more than 850 employees, roughly 20% of the workforce.
Against the broader trend, Binance stands out. CEO Changpeng Zhao said it would create 2,000 new roles, noting that winter is a good time to prepare for the next bull run.
This week Kraken CEO Jesse Powell presented a document on corporate culture and invited any employees who disagree with its contents to resign.
Circle unveils euro-pegged stablecoin Euro Coin
The euro-pegged stablecoin Euro Coin (EUROC) is backed by euro-denominated reserves held in financial institutions within the regulatory perimeter of the US. One such institution will be Silvergate Bank.
Euro Coin was launched on the Ethereum blockchain as an ERC-20 token. In the future Circle will add support for additional networks. Trading is planned to commence on June 30.
Also on ForkLog:
- The community warned of possible liquidations of whale positions in ETH and SOL.
- The head of Nexo compared the crypto market crisis to the 1907 banking panic.
- Mark Cuban predicted the disappearance of crypto projects without meaningful prospects.
- An expert described a potential scenario for DAI de-pegging.
What else to read and watch?
With The Merge, the long-awaited Ethereum network upgrade, only months away, ForkLog has explored the features of the upcoming upgrade and its potential impact on the investment appeal of the second-largest cryptocurrency.
We explained how Celsius, 3AC and stETH are linked, and discussed the market impact of their potential bankruptcy and the possible collapse of the staking Ether.
In ForkLog’s educational cards we looked at what Lido is, liquid staking and Web3. We explored what happened to the Celsius platform.
In traditional digests we gathered the week’s main events in cybersecurity and artificial intelligence.
Blockchain technology remains one of the hottest trends among finance, government and business worldwide. ForkLog offers an overview of the most interesting recent initiatives.
On June 13 we discussed market movements and more in a live ForkLog LIVE with our guests:
- Anton Kravchenko — founder and CEO of Xena Exchange;
- Tone Vays — Bitcoin evangelist and trader;
- Mikhail Chobanian — founder of Kuna.io.
This week we also published a special report on how the world of blockchain and cryptocurrency will be shaped by women.
Read ForkLog Bitcoin news in our Telegram — cryptocurrency news, prices and analysis.