Bitcoin dipped below $20,000 on Tuesday and again on Wednesday following a weekend-long market rout. Moves by cryptocurrency exchanges Binance and Celsius to temporarily halt withdrawals only helped to increase investor concerns and exacerbate the selloff.
The selloff follows the headline-grabbing LunaCoin/Terra crash that shook markets and called the legitimacy of "StableCoins" like Terra into question. However, the crash also served as a warning of the instability lying ahead. Tied to Bitcoin rival Ethereum, the cratering of the NFT market served as a secondary warning of increasing market volatility.
While many crypto investors and market experts have been bracing themselves for a coming storm for much of the year, the weekend rout still seems to have taken many by surprise, including exchanges.
Celsius acted before the worst of the crash began to set in on Monday, sending a memo to users late Sunday evening that the exchange had paused all Bitcoin withdrawals. Celsius was upfront with users, citing "extreme market conditions" as the reason for the pause, though many users on Twitter
Binance followed with its withdrawal halt on Monday morning, though in the tweet announcing the pause, a technical glitch was cited as the reason for the break, with a transaction supposedly being held up in some way. In contrast, Twitter users and some commentators have voiced disbelief that this is the reason for the pause, though no evidence has come out to hint that a technical glitch is a false claim.
The last year has been a rough period for the cryptocurrency market, which has suffered from continual routs as the global economy struggles to recover from the COVID-19 pandemic. While even securities markets have struggled over the last few years, cryptocurrency markets are largely devoid of regulation and the legal safety net protecting the average shareholder. With recession looming on the horizon, an already unstable crypto market could cause catastrophic losses for investors.
There are plenty of signs that the crypto market is still in for worse instability. Despite maintaining support among its userbase and returning to exchanges following its crash, LunaCoin has struggled to regain traction. The NFT market is faring little better, with rampant theft and fraud causing continual losses and the general state of the crypto market causing the values of many tokens to crater.