It’s not just Bitcoin, but the premium cryptocurrency isn’t immune from what looks like a market collapse. Both CNBC and the Wall Street Journal point out that the bear rampage in crypto has wiped out more than a year’s worth of gains for Bitcoin holders, and that almost all other cryptos are plunging along with them. A combination of a sudden failure in one exchange and growing unease with the global economy has combined into a toxic stew for speculative currencies.

CNBC warned yesterday that the value won’t come back soon, if ever. Josh Brown says that the “crypto winter” label is overblown, but anyone still working at crypto firms on an equity basis is absolutely screwed:

It’s not looking any better today, the Wall Street Journal reports. This may not be a “crypto winter,” but the collapse is more profound than a bear market too:

Since late last year, the air has been leaking out of cryptocurrencies, with investors pulling back from riskier assets in anticipation of easy-money market conditions coming to an end.

Two high-profile incidents in recent weeks have accelerated cryptocurrencies’ fall. In May, the collapse of stablecoin TerraUSD and its sister token Luna prompted a selloff across cryptocurrencies. Then, on Sunday, Celsius Network, one of the largest crypto lenders, said it was pausing all withdrawals, swaps and transfers, sparking further panic.

The pain in cryptocurrency markets has been broad. The price of ether, the in-house currency of the Ethereum network, fell to $1,054.27 Wednesday, down 11% from its 5 p.m. ET level Tuesday. Cardano’s ada token and even joke cryptocurrency dogecoin slid.

The latest sign of stress and confusion came from a vague tweet from the co-founder of Three Arrows Capital, a hedge fund that invested heavily in cryptocurrencies. “We are in the process of communicating with relevant parties and fully committed to working this out,” the tweet said. No further detail was provided. Three Arrows didn’t immediately respond to a request for comment.

Maybe there should be an intermediate term between “bear” and “winter.” “Collapse” looks more accurate, especially when seeing the chart that accompanies the WSJ report, although there’s still a lot of value left in Bitcoin. The WSJ chart for Bitcoin price starts at the beginning of the year, but this chart from Bin and Refinitiv gives an even better view of the collapse over a full year:

Bear in mind that the year-on-year CPI inflation rate of 8.6% makes this even worse. Even for long-term investors, breaking even over the past year in nominal dollars is akin to taking an 8.6% loss in buying power. That’s true of every investment, of course, and it depends on which currency you use to extract Bitcoin value, but cryptos exist in some part as a supposed buffer to these kinds of economic variations.

CNBC takes a slightly sunnier view of the crypto climate, or at least on Bitcoin:

Charlie Morris, founder of digital asset management firm ByteTree, said $20,000 was close to the peak of bitcoin’s last major bull run in 2017 and so “might prove to be a support level.”

“At $20k, bitcoin has made no money since the 2017 high, but that disguises the outsized returns over all prior time frames,” he told CNBC.

Digital tokens are in free fall as fears of climbing inflation, aggressive interest rate rises and liquidity issues at a key player in the crypto space have plagued crypto markets.

It’s not all peaches and cream at CNBC, though. The same report warns that a lockout of investors from accounts at one firm may catalyze a cascade that might infect a broader swath of the financial markets:

Earlier this week, crypto lending firm Celsius began blocking users from accessing their funds, stoking speculation that the company may soon become insolvent.

Investors worry a possible liquidation of Celsius may lead to even more pain for crypto, potentially knocking down other major players.

“If Celsius collapses, a liquid cascade could occur where whales who have leveraged bets on Bitcoin and Ethereum become liquidated,” said Marcus Sotiriou, analyst at U.K. based digital asset broker GlobalBlock.

Celsius holds a lot of assets in the decentralized finance space, including staked ether, a token offered by crypto start-up Lido Finance that is meant to be worth the same as ether, the second-biggest cryptocurrency.

How much leveraging has gone into those “whales”? And where did that leveraging take place? The total sum of that leveraging across crypto markets is not likely to be large enough where a broad default could destabilize a major financial institution, but it’s still a non-zero possibility. With the Fed tightening the money supply and a recession seemingly on its way, these financial institutions will have other shocks to weather too.

The timing couldn’t be worse in that sense. A crypto market collapse would be bad even in a healthy economy where financial institutions aren’t under any unusual stress, but we are not in that environment at the moment. Stay tuned, and gird your loins.

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