The cryptocurrency market is Mired in a bear market.
On June 13, the latest market data showed that the price of bitcoin briefly hit $25,000 a piece, and the back and forth at that point, the 24-hour decline has reached 7.4%, the lowest since December 26, 2020.
Ethereum, another pillar of the market, has suffered even more, with the latest offer falling below $1,400 a coin and heading towards the $1,300 mark, down 11.01% in 24 hours and the lowest since March 1, 2021.
As the two pillars of cryptocurrencies continue to slide, the total market value of cryptocurrencies has plummeted.
According to CoinGecko, the cryptocurrency's total market capitalization fell to $107 million on June 13, a 7.6% drop in 24 hours and more than half of its $2.8 trillion valuation peak in November 2021. As the slump continues, cryptocurrency market capitalization will fall back below the trillion-dollar mark.
And when extremes come, the clearing of derivatives becomes the fuel for booms and busts.
In the past 24 hours, $163 million in bitcoin contracts and $143 million in Ethereum contracts have exploded, according to market data.
More critical, however, are DeFi data. On June 13, Dune Analytics data showed that more than $12.7 million had been cleared in the past 24 hours under the mainstream DeFi lending agreements. Of that, $4.516 million was settled by Aave, $6.782 million by Compond and $1.416 million by MakerDAO.
In a short month, after the algorithm stabcoin UST explosion event, now another project is in trouble, and brought the whole market collapse.
As cryptocurrencies use smart contracts to build financial services, they are innovative but also carry huge risks. The UST algorithm is a typical case.
A project called Lido and an encrypted lending platform named Celsius are poised to explode.
It is reported that Lido project specializes in providing ETH liquidity pledge service for users. Users can lock any amount of ETH and then receive equity Token "stETH" for earning income in DeFi. Once the main network upgrade is complete, users can switch back to their ETH.
Lido's investors are among the top VCS in the crypto world, including A16Z, Alameda Research, Coinbase, Paradigm, DCG, Jump Capital and Three Arrows Capital.
Since each stETH can only be redeemed online through the Ethereum beacon chain. Before that, the 12.8 million ETH in ETH 2.0 pledge contracts is illiquid. Lido holds 32% (4.1 million) of the 12.8 million ETH.
Then theoretically, each "stETH" should be equal to one ETH, and the price ratio should be 1:1. However, around June 10th, its liquidity appeared to tilt, and the price of stETH also broke anchor, and the value dropped to 0.95 ETH. A large number of financial institutions involved began to pull their money out.
On June 13, according to Curve page, the exchange ratio between stETH and ETH has dropped to 1:0.9471, and the ratio of the liquidity pool is further skewed, in which stETH accounts for 79.91%, indicating that users do not want stETH.
Celsius, another financial institution, is a whale holder of stETH. In fact, they are also the largest holders of interest-bearing stETH (on AAVE). This means that Celsius and Lido are tied together.
But Celsius has been attacked by hackers for more than $120 million in recent years, and its users lost more than $500 million in assets during the recent explosion of the UST project.
On October 8, 2021, Celsius reported that its AUM exceeded $25 billion. As Celsius is a private company, it only publishes its financial data for years 19 and 20.
What the authorities don't want to say is that Celsius faces liquidity risk due to losses from a previous hacking incident. The market already thinks Celsius is on the verge of bankruptcy.
If the project fails, the liquid pool of assets will be sold off and users of the service will flee, causing panic in the market.
On June 13, crypto lending platform Celsius suspended all withdrawals, transactions and transfers on its social network. Officials say the move is in the interest of the entire community. Its CEL token fell more than 60% on the news and is now quoted at $0.133.
The life and death of these two projects will become one of the weathervanes of this round of market storm.
Cryptocurrencies are now close to where they were in the last cycle, having given up all the gains from the bull market that began in late 2020.
With the decline of Bitcoin, the value of bitcoin assets in the hands of Tesla, Micro Capital and Gray Capital has also been greatly reduced, and these FINANCIAL institutions in the United States will suffer losses.
Another market vane in the crypto market in recent years is the signal of interest rate hike from the Federal Reserve. On June 14, the Federal Reserve will hold the FOMC to announce the interest rate resolution, and at the same time, The Chairman of the Federal Reserve Powell will hold a monetary policy press conference.
And actions from the Federal Reserve will affect the extent to which cryptocurrencies fall.