Bitcoin drops below key $20,000 threshold

Bitcoin’s price has broken below the key threshold of $20,000 for the first time since November 2020, risking triggering a fresh wave of selling and deepening the crisis gripping the digital asset sector.

The largest cryptocurrency, which acts as a benchmark for the broader crypto market, plunged to under $18,000 on Saturday, a fall of around 14 per cent, before bouncing back slightly. That took it below the peak level of the previous bull run in crypto markets in 2017 and erased years of gains for long-term holders.

Traditional financial markets were shaken this week after a trio of big central banks, led by the US Federal Reserve, boosted borrowing costs as part of an effort to tamp down intense inflation. Global equities posted their worst week since the darkest days of the pandemic in March 2020 as traders fretted that the aggressive action could snarl global growth or even trigger a recession.

The crypto market has sustained particularly acute pressure as the race for returns prompted by the massive stimulus efforts of central banks and governments at the height of the pandemic abruptly shifts into reverse. 

Investors and executives have been anxiously watching the price of bitcoin in recent days, fearing a drop below $20,000 may prompt forced liquidations of large leveraged bets in the markets, putting more pressure on the price and worsening the credit crunch that has already struck large crypto lenders and traders.

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