Crypto industry fears contagion as bitcoin slips under $20,000

 The cryptocurrency industry was on edge on Monday as bitcoin struggled to stay above a key level, with investors fearing that problems at major crypto players could unleash a wider market shakeout.

Bitcoin, the world's biggest cryptocurrency, was trading just under the symbolic level of $20,000 in early London trading hours - roughly the peak of its charge to its previous record in 2017.

Bitcoin had dropped on Saturday to as low as $17,592.78, falling below $20,000 for the first time since December 2020.It has lost almost 60% of its value this year and 37% this month alone in the cryptocurrency sector's latest meltdown.

Crypto hedge fund Three Arrows Capital is exploring options including the sale of assets and a bailout by another firm, its founders told the Wall Street Journal in a story published Friday, the same day Asia-focused crypto lender Babel Finance said it would suspend withdrawals.

"There is a lot of credit being withdrawn from the system and if lenders have to absorb losses from Celsius and Three Arrows, they will reduce the size of their future loan books which means that the entire amount of credit available in the crypto ecosystem is much reduced," said Adam Farthing, chief risk office for Japan at crypto liquidity provider B2C2.

Smaller tokens, which usually move in tandem with bitcoin, were also hurt. No.2 token ether was at $1,0752, having dipped below its own symbolic level of $1,000 over the weekend.

The fall in crypto markets has coincided with a slide for equities, as U.S. stocks suffered their biggest weekly percentage decline in two years on fears of rising interest rates and the growing likelihood of recession.

Bitcoin's moves have tended to follow a similar pattern to other risk assets such as tech stocks.

The overall crypto market capitalisation is roughly $877 billion, according to price site Coinmarketcap, down from a peak of $2.9 trillion in November 2021.

A fall in stablecoins - a type of crypto designed to hold a steady value - is also suggesting investors are pulling money from the sector as a whole.