By Zilber
Bitcoin dipped below $23,000 for the first time since 2020 as Binance, the world’s biggest cryptocurrency exchange stopped users from withdrawing bitcoin early Monday.
Binance founder and CEO Changpeng Zhao blamed the “temporary pause” on “a stuck transaction causing a backlog” in a tweet at 8 a.m. on Monday.
The cryptocurrency exchange ultimately restored service about three hours later, even though Zhao had initially claimed the clog would take just 30 minutes to clear.
Binance’s freeze came as cryptocurrency investors scrambled to cut their losses during an increasingly brutal rout. Bitcoin, the largest cryptocurrency, fell more than 14% on Monday, recently trading as low as at $22,680 in the afternoon before ticking back up to around $23,296.
The second-largest cryptocurrency, ethereum, was also down 14% at around $1,235.
The stock market was also battered, with the tech-heavy Nasdaq Composite Index slumping 4.7% and the Dow Jones Industrial Average down 2.8%.
This is only impacting the Bitcoin network. You can still withdraw Bitcoin on other networks like BEP-20.
Likely this is going to take a bit longer to fix than my initial estimate. More updates soon. Thanks for your patience and understanding
— CZ 
Binance (@cz_binance) June 13, 2022
The selloff is an indication that investors are shedding risky assets in favor of safer options like the dollar as the US continues to be slammed by record levels of inflation — forcing the Fed to hike interest rates which could potentially push the economy into a recession.
“What you’re seeing today is the market realizing that the Fed is probably going to have to raise interest rates a lot higher and a lot more quickly than we thought even a few weeks ago,” David Sacco, a finance professor at the University of New Haven, told.
Sacco said investors now see cryptocurrencies as “a turbocharged version of the Nasdaq or technology stocks.”
“Crypto’s problems are rooted in the overall market problems, but they’re exacerbated by crypto specific events” such as the Binance freeze, he said.
Since peaking at $68,991.85 in November, bitcoin’s value has plummeted some 65%.
The total value of crypto assets hit a peak of $2.8 trillion last November. It fell below $1 trillion on Monday for the first time since 2020, according to CoinMarketCap.
Investors on Monday sought safety with the US central bank seen likely to aggressively ramp up borrowing costs further to combat runaway inflation.
The phrases #cryptocrash, bitcoin and #stockmarketcrash were all trending on Twitter Monday morning.
Crypto took another hit over the weekend after Celsius Network, a leading digital coin lender, put a pause on withdrawals, citing volatile conditions in the market.
“Today we are announcing that Celsius is pausing all withdrawals, swap, and transfers between accounts,” the platform said in a statement late Sunday.
Celsius made the move “due to extreme market conditions”, it added.
The total value of Celsius’s customer deposits had already shrunk by more than half to under $12 billion in May compared with the end of last year.
Last month, TerraUSD, a so-called stablecoin that was pegged to the US dollar, collapsed, wiping out $40 billion in investor funds.
Stablecoins are supposed to be less vulnerable to big swings – thus the name – but Terra suffered a spectacular collapse in a matter of days.
Sacco said investors should expect more market chaos in the next six to 12 months.
“It’s been 40 years since the Fed has had to address inflation like we’re having now,” he said. “It’s going to be a rough ride. Markets are going to go down, there’s going to be a lot of economic uncertainty.”
