Bitcoin closed June 40% lower and below $20K as markets see recession fears and contagion risks

(Kitco News) The world’s largest cryptocurrency fell 40% in June, ending the month below its key level of $20,000. Markets are pessimistic with focus shifting to mounting recession fears and more contagion risks in the crypto space.

Bitcoin touched a low of $18,917 on Thursday, as markets digested the somewhat cooler pace of the Fed’s favorite inflation gauge and the decline in real personal consumption in May.

Everyone’s talk was also Fed Chair Jerome Powell’s comment that the US central bank could go too far in raising interest rates when fighting inflation. But according to Powell, the biggest risk is a failure to restore price stability.

“Is there a risk that we are going too far? There is certainly a risk. But it is not the biggest risk to the economy. The biggest mistake we make is failing to restore price stability,” Powell said during the policy committee meeting. European Central Bank Forum on Central Banks in Sintra, Portugal.

At the time of writing, bitcoin is at $19,172, down 40% since the beginning of June and down 72% since its November high of $69,000. The price of Ethereum, the second largest cryptocurrency in the world, reached $1034, down nearly 50% in June.

More specifically for cryptocurrencies, Grayscale Investments announced that it had filed a lawsuit against the US Securities and Exchange Commission (SEC) after the company’s Bitcoin ETF was rejected by the regulator.

According to the SEC, Grayscale’s implementation fails to meet a standard designed to prevent fraudulent practices and protect investors.

Grayscale said it did not agree with the SEC’s decision. “Grayscale supports and believes in the SEC’s mandate to protect investors… We are deeply disappointed and strongly disagree with the SEC’s decision to continue denying Bitcoin ETFs access to the US market,” said Michael Sonnenchin, CEO of Grayscale. Michael Sonnenchin, CEO of Grayscale.

There were also increased contagion risks that continued to weaken the cryptocurrency market. In the latest barrage of bad news, crypto hedge fund Three Arrows Capital (3AC) has been liquidated. It came after crypto broker Voyager Digital sent a virtual notice to 3AC on Monday after the hedge fund failed to make payments on its loan of 15,250 Bitcoin, about $324 million, and $350 million of USDC stablecoin.

“There will likely be more in the next month or two,” Dan Morehead, CEO of Pantera Capital, wrote in a note. “Every bankrupt actor entity leaves a series of problems to its peers.”

The weaker-than-expected US macroeconomic data also weighed on US stocks and cryptocurrency markets.

“In the US, consumer sentiment is now lower than it was during the global financial crisis (GFC) in 2008, as shown by the University of Michigan index of consumer confidence. This gives an additional indication that US growth will slow in the coming months,” Global Analyst Marcus Soterio said. Block “coincides with higher inflation.” “The stagnation may not be fully priced in by most investment fund analysts…hence the following months may result in lower frequency of earnings revisions. If that is the case, stocks could be forced lower and cryptocurrency brought in as well.”

However, not everyone is seeing cryptocurrencies following in the footsteps of US stocks for much longer.

Morehead noted that the cryptocurrency could decouple from risky assets this year. “It might take a few more months for the blockchain to separate, but when the dust settles, I can easily see a world where bonds, stocks, real estate, everything with reduced cash flow — and blockchain, commodities, oil,” he wrote, “gold and other things that don’t really correlate with rates go up by a ton.” .

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