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Bitcoin (BTC) published the worst quarter in more than a decade: 5 reasons

1. Macroeconomic pressure

During the quarter, the U.S. Federal Reserve made two aggressive interest rate hikes to combat rampant inflation. This has raised fears of a recession in the US and other countries.

It has also suffered stocks, particularly high-tech names. The tech Nasdaq Composite fell 22.4% in the second quarter, the worst figure for the quarter since 2008.

Bitcoin has been closely linked to the movement of US stock price indices. The sell-off has affected bitcoin and the crypto market as investors dump risky assets.

2. TerraUSD collapse

The first major episode last quarter was the crash of terraUSD’s algorithmic stablecoin and the luna sister token, which caused a shock in the industry.

Stablecoin is a type of cryptocurrency usually tied to a real asset. TerraUSD, or UST, was to be pegged to each other with the US dollar. Some stablecoins are backed by real assets such as fiat currency or government bonds. But UST was guided by an algorithm and a complex system of burning and minting coins.

That system failed. TerraUSD lost its peg to the dollar and led to the termination of the linked luna token, which became void.

This episode affected the industry and had serious consequences, primarily for the cryptocurrency hedge funds Three Arrows Capital, which were exposed to terraUSD (more on this below).

3. The Celsius lender stops withdrawing funds

Crypto-lender Celsius suspended withdrawals for customers in June.

The company has offered users a return of more than 18% when they contribute cryptocurrency to Celsius. He then lent this money to crypto market players who were willing to pay a high interest rate to borrow money.

But falling prices have put this model to the test. Celsius called the reason for the suspension of withdrawals “extreme market conditions.”

On Thursday, Celsius said in a blog post that it was “taking important steps to preserve and protect assets and explore the options available to us.”

These options include “conducting strategic deals as well as restructuring our commitments, among other ways”.

Problems with Celsius have revealed the weakness of many lending models used in the cryptocurrency industry, which offered users high returns.

4. Elimination of capital Three arrows

Three Arrows Capital – one of the most famous hedge funds focused on investing in cryptocurrency.

The ten-year-old firm, also known as 3AC, created by Zhu Su and Kyle Davis, is known for its bets on the high-credit crypto market.

3AC was exposed to the algorithmic stemcoin terraUSD and the sister token luna.

Last month, the Financial Times reported that U.S. crypto creditors BlockFi and Genesis had liquidated some 3AC positions, citing people familiar with the matter. 3AC borrowed from BlockFi but failed to meet margins.

The margin requirement is a situation in which the investor must allocate more funds to avoid losses on the transaction with the borrowed money.

Then 3AC did not repay the loan in excess of $ 660 million from Voyager Digital.

As a result, Three Arrows Capital was liquidated, a person aware of it told CNBC this week.

The 3AC situation has opened up the nature of trade in a high-leverage industry recently.

5. CoinFlex-‘Bitcoin Jesus ’spat

The cryptocurrency exchange CoinFlex stopped withdrawing funds from clients last month, citing “extreme market conditions” and a client account that had switched to negative capital.

CoinFlex claimed that the client, which it claims is high-profile crypto investor Roger Wehr, owes the company $ 47 million. Ver, nicknamed “Bitcoin Jesus” for his evangelical views of the industry in the early days, denies that he owes CoinFlex money.

The exchange said that usually the account, which turns into negative capital, will be liquidated. But CoinFlex and Ver had an agreement that did not allow this to happen.

CoinFlex has released a new token called Recovery Value USD, or rvUSD, to raise $ 47 million to resume withdrawals, and offers a 20% interest rate for investors looking to buy and hold a digital coin.

CEO Mark Lamb told CNBC this week that the company is in talks with a number of troubled loan funds to buy the token. CoinFlex is also seeking a refund from Ver.

Bitcoin (BTC) published the worst quarter in more than a decade: 5 reasons

Source link Bitcoin (BTC) published the worst quarter in more than a decade: 5 reasons

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