The “digital gold” lost 1.8% in Asian trading hours as Hong Kong’s Hang Seng dropped 2.1%, while China’s Shanghai Composite Index declined 1.4%. According to the official surveys, consumer confidence fell in South Korea and Japan, adding to the fears of recession.
The experts believe that crypto would most likely continue its downturn unless the economy shows significant improvement. “Most short-term technicals point to an above-average chance of a final ‘washout’-style decline before this bottoms,” wrote Mark Newton, technical strategist at Fundstrat, in a note seen by Bloomberg. According to the expert, Bitcoin has room to drop as low as $12,500 to $13,000, which he describes as “an excellent place for intermediate-term buyers to add to longs.”
The recent crypto crash wiped $2 trillion from the market, leaving many smaller crypto companies on the brink of survival while the larger ones announced they would cut their staff, some even by 30%. Some crypto lenders, including Celsius and BlockFi, had to deal with the lack of liquidity, with the former being forced to freeze withdrawals. Earlier, the prominent hedge fund Three Arrows Capital defaulted on its $670 loan, revealing that it was nearly insolvent.
The combination of rampant inflation, ongoing war in Ukraine, and the meltdown of several crypto companies created a “perfect storm” that is likely to continue. According to the FTX CEO Sam Bankman-Fried, some third-tier exchanges are already secretly insolvent, being unable to maintain their generous two-digit yields that attracted investors during the latest bullish euphoria.