Bitcoin value slumps below $20,000 in cryptocurrencies turmoil

The price of bitcoin has fallen below $20,000 (£16,400) amid deepening turmoil in the cryptocurrency market.

The cornerstone digital asset slipped to levels not seen since December 2020 on Saturday morning, at one point going under $19,000 before recovering to about $19,160, according to CoinDesk.

Bitcoin has now lost more than 70% of its value compared with the peak it reached last year.

Bitcoin and other cryptocurrencies have been hit by several factors including rising inflation, which has prompted interest rate rises by central banks. This, in turn, has dampened investor appetite for riskier assets such as cryptocurrencies and has hit global stock markets, with the previously high-flying tech sector affected in particular.

Last week the UK and US central banks raised rates in an attempt to quell rising prices, putting further pressure on digital assets.

The crypto market, which trades on a 24-hour basis, is also suffering internal problems that began with the collapse of Terra, a so-called stablecoin whose value was supposed to be pegged to the dollar. Its failure in May shook faith in digital assets, triggering a wave of selling that has been exacerbated by the wider interest rate moves. The entire crypto market, worth more than $3tn in November last year, is now valued at $884bn, according to data firm CoinGecko.

The investor panic also started to affect financial businesses focused on the crypto markets. Last week Celsius Network, a bank-like business that offered high rates of return on cryptocurrency deposits, stopped customer withdrawals. Then Three Arrows Capital, a hedge fund that made expensive bets on the crypto markets, admitted it was in trouble.

The $20,000 level is viewed as important by some crypto followers for a number of reasons. About half of all bitcoin wallets were sitting on profits at a price of just over $20,000 according to an analysis by the Columbia Business School in New York, cited by the New York Times.