Bitcoin falls as much as 10% in deepening cryptocurrency selloff

More than $1.1 billion was liquidated in digital asset markets on Monday

A woman shows a stock graph on her phone with the price of Bitcoin in relation to the dollar, in El Salvador. Reuters

Bitcoin extended its decline on Tuesday as investor sentiment took another leg down over fears that bigger US Federal Reserve interest rate increases loom as part of measures to quell inflation.

The world’s largest digital token shed as much as 10 per cent to reach $20,824, the lowest level since December 2020. It then pared some of the drop to trade at $21,899 as of 11.20am in Singapore.

A range of other tokens from Ether to Avalanche were also nursing losses.

“Sentiment for cryptos is terrible as the global crypto market cap has fallen below $1 trillion dollars,” said Edward Moya, senior market analyst for the Americas at Oanda. He said a drop below the $20,000 level could lead to “even uglier” price action.

Cryptocurrencies have become emblematic of a flight from speculative investments as monetary policy is tightened around the world to fight price pressures, draining liquidity from global markets.

The move by cryptocurrency lender Celsius to freeze withdrawals on Monday exacerbated worries about the stress in the digital asset sector, which was already on tenterhooks after the collapse of the Terra/Luna ecosystem.

Traders are also monitoring MicroStrategy, whose big bet on Bitcoin is backfiring. The company loaded up on the coins and chief executive Michael Saylor became a flag-carrier for Bitcoin bulls with his nearly relentless optimism.

Among the issues weighing on the company is the threat that an even deeper drop in the token’s price will require it to post additional collateral for loans.

More than $1.1 billion was liquidated in cryptocurrency markets on Monday — about $685 million of longs and $468 million on the short side, according to Coinglass data. That is the most for both longs and shorts in at least the past three months, the data showed.