What happened
Cryptocurrencies were having a rough day on Sunday after a healthy recovery last week. But in cryptocurrencies, we have seen recently that momentum doesn’t last for long.
As of 4:00 p.m. ET, Bitcoin (BTC -2.65%) is down 3.5% in the last 24 hours, Ethereum (ETH -3.38%) has fallen 4%, and Dogecoin (DOGE -3.45%) is off 3.8%. But over the last week, the same cryptocurrencies are up by 7.4%, 8.7%, and flat, respectively.
So what
More pain is being reported in the crypto lending space as exchange Blockchain.com reportedly faces a $270 million loss on loans to Three Arrows Capital. The collateral damage and web of loans in the crypto space have come to light after Three Arrows Capital filed for bankruptcy in the U.S. and has begun being liquidated.
The good news is that Celsius continues to unwind its complex positions. Over the weekend, it reportedly paid back $258 million to Aave and Compound in order to free up $950 million in collateral. If Celsius can unwind its positions and capture collateral, we may see it being able to pay back customer funds when they want to withdraw. The problem is that getting collateral back may also mean selling crypto assets, dumping more on the market at a time when buyers are scarce.
Bitcoin may also be coming off a high after Binance announced on Friday the ability to trade that currency without fees. Trading volume spiked as a result, which died down once the initial exuberance wore off.
Now what
Weekends can be volatile for cryptocurrencies because volume goes down and any news can move the market extremely quickly. With all of the liquidations in crypto today, it’s possible we see even more selling pressure in the coming weeks as big leveraged positions are unwound. But that’s not what’s going to drive the price of cryptocurrencies long-term.
I do think it’s worth taking a step back to think about what’s being developed using cryptocurrencies and the blockchain as a base. There are…
