Bitcoin and other cryptocurrencies plunged through the weekend and into Monday as high inflation sent investors running for the exits and caused major trading platforms to seize up.
Bitcoin was changing hands below $24,000 US at one point on Monday morning, down 20 per cent since Friday and enough to push the value of the world’s dominant cryptocurrency down to its lowest point since December 2020.
The sell-off prompted a major crypto exchange, called Celsius, to halt withdrawals on Sunday evening, meaning investors can’t take what’s left of their money out. “We are taking this action today to put Celsius in a better position to honour, over time, its withdrawal obligations,” said the exchange, which had $12 billion in assets before the run.
Other major crypto exchanges also had problems dealing with the deluge of trading orders, with Binance saying it has “temporarily paused” Bitcoin withdrawals.
The sell-off brought the total value of all cryptocurrencies below $1 trillion US, a threshold it has not dipped below since January 2021. The value of crypto assets peaked at about $2.9 trillion in November 2021 before countries around the world started seeing inflation rise to its highest point in decades.
On Friday, data showed the U.S. inflation rate rose to 8.6 per cent in May, the highest level in more than 40 years. Investors and market watchers had hoped the figure would ease from the 8.3 per cent level it hit the previous month, but instead it went even higher, a troubling sign that central bank efforts, such as rate hikes to rein in inflation, aren’t working.
“As inflation proves to be an even trickier opponent to beat than expected, Bitcoin and ethereum are continuing to get a severe bruising in the ring,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“They are prime victims of the flight away from risky assets as investors fret about spiraling consumer prices around the world.”