Bitcoin closes June down 40% and below $20,000 as markets view recession fears and contagion risks

(Kitco News) The world’s largest cryptocurrency fell 40% in June, ending the month below its key $20,000 level. Markets are depressed as attention turns to growing recession fears and more contagion risks in the crypto space.

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

Federal Reserve Chairman Jerome Powell’s comment that the US central bank may be going too far with its rate hikes in the fight against inflation was also fresh on everyone’s mind. But, according to Powell, the biggest risk would be not to restore price stability.

“Is there a risk that we go too far? Certainly there is a risk. But it is not the biggest risk for the economy. The biggest mistake to make would be not to restore the price stability,” Powell said during a policy panel at the ECB’s Central Banking Forum in Sintra, Portugal.

At the time of writing, Bitcoin was at $19,172, down 40% since early June and 72% since its all-time high of $69,000 in November. Ethereum, the second largest cryptocurrency in the world, was last at $1,034, down nearly 50% in June.

More specific to crypto, Grayscale Investments has announced that it is suing the United States Securities and Exchange Commission (SEC) after the company’s Bitcoin ETF spot was rejected by the regulator.

According to the SEC, Grayscale’s app failed to meet the standard designed to prevent fraudulent practices and protect investors.

Grayscale said it disagreed with the SEC’s decision. “Grayscale supports and believes in the SEC’s mandate to protect investors…and we are deeply disappointed and disagree with the SEC’s decision to continue to block spot Bitcoin ETFs from coming to the US market,” said Michael Sonnenshein, CEO of Grayscale.

There were also growing contagion risks that continued to plague the crypto market. In the latest barrage of bad news, crypto hedge fund Three Arrows Capital (3AC) has gone into liquidation. It came after crypto broker Voyager Digital sent a notice of default to 3AC on Monday after the hedge fund failed to make payments on its 15,250 Bitcoin loan, or roughly $324 million and $350 million. USDC stablecoin dollars.

“There will likely be a few more to come in a month or two,” Pantera Capital CEO Dan Morehead wrote in a note. “Every bankrupt leveraged entity leaves a series of problems for its counterparties.”

Weaker-than-expected US macro data releases also weighed on US stocks and crypto markets.

“In the United States, consumer sentiment is now lower than it was during the GFC (Global Financial Crisis) in 2008, as indicated by the Consumer Sentiment Index from the University of Michigan. This gives a further indication of slowing growth in the United States in the coming months, coinciding with high inflation,” said GlobalBlock analyst Marcus Sotiriou. “A recession may not be fully discounted by most from investment fund analysts… Therefore, the following months could see iterations of downward earnings revisions. If so, equities could be forced lower and drag crypto down as well.”

However, not all see crypto following in the footsteps of US equities for much longer.

Morehead noted that the crypto could decouple from risky assets this year. “It may take a few more months for the blockchain to decouple, but when the dust settles, I can easily see a world where bonds, stocks, real estate, and anything with discounted cash flow are down. – and blockchain, commodities, oil, gold and other things that really aren’t related to rates have gone up a ton,” he wrote.

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