Bitcoin (BTC)
prices are sliding down towards crucial support level at $20,000. It is worth
noting that Bitcoin prices have never dropped below their previous upward cycle
peaks before, which is exactly $20,000 in 2017. So, any slide below this figure
would certainly be an extraordinary event. Many investors are betting on this
level where most of the open interest on BTC options is located. The same
situation can be seen with Ethereum, where open interest is seen to be at $1,000.
Everybody
who sold put options has to sell the underlying asset in the spot market to
hedge the option difference. The more prices are sliding towards the options’
strike price, the more of the asset has to be sold. So, the further down the
price of BTC goes, the more bearish
pressure will be put on Bitcoin. Some of the large market players may not
survive this and may become bankrupt.
Crypto
investors are now focused on the Celsius crypto lending platform that has
promised fixed returns for investors that invest in DeFi protocols. The issue
is that despite $12 billion under management the company chose to deposit its
funds in risky assets. The platform put
$500 million into UST, which recently crashed causing the company’s finances to
deteriorate. Around $400 million are locked
in ETH 2.0 via Lido protocol and its stETH token. The problem is that ETHs that
are allocated in the Beacon chain are
locked for quite a long period of time and therefore cannot be withdrawn. That
is where the Lido protocol and its stETH token come to the rescue. The protocol
accepts ETH in exchange for stETH that must be locked in true ETH at 1 to 1
ratio. And that was true during the bullish crypto market.
However, the
situation was very different for the bearish market when the stETH price
deteriorated, threatening a margin call for positions backed by stETH. Then
finally Celsius management to back its margin in Maker protocol with $400
million. The margin call emerged when the BTC prices fell below $20,000-22,000.
All in all, the company is now in a stalemate that could be resolved either
with new borrowings, strategic investment, or the sale of the business. The
rival Nexo has extended its interest to acquire Celsius, but the latter has declined
any talks so far.
In other
words, it is quite an unfavorable situation right now in the market to open
long positions. The existing market sentiment suggests that BTC prices may plummet
to $20,000 soon and continue to dive further to $10,000. The crypto winter
seems not to be coming to the market just yet, and investors should be very
patient to survive this severe turbulence with a profit.