Bitcoin Price Falls Toward $20,000 as Cryptocurrency Rout Deepens

Bitcoin staved off a fall under $20,000, bolstered by a market rally after the Federal Reserve approved its biggest interest rate increase since 1994.

Bitcoin settled at $21,685.02 on Wednesday, down 1.4% from its price at 5 p.m. on Tuesday, according to Dow Jones Market Data. In the morning, it traded as low as $20,111, threatening to fall below $20,000 for the first time since December 2020.

It remains down, however, about 68% from its high of $67,802.30 reached in November 2021.

The rout in cryptocurrencies has wiped out roughly 1½ years of gains for bitcoin, which started to soar at the end of 2020 as speculative fervor washed over financial markets.

Since late last year, the air has been leaking out of cryptocurrencies, with investors pulling back from riskier assets in anticipation of easy-money market conditions coming to an end.

Two high-profile incidents in recent weeks have accelerated cryptocurrencies’ fall. In May, the collapse of stablecoin TerraUSD and its sister token Luna prompted a selloff across cryptocurrencies. Then, on Sunday, Celsius Network, one of the largest crypto lenders, said it was pausing all withdrawals, swaps and transfers, sparking further panic.

The price of ether, the in-house currency of the Ethereum network, fell 0.8% to $1,177.44 from its 5 p.m. ET level Tuesday, after trading as low as $1,013 on Wednesday. Most other cryptos, however, rose. Of the top 30 tracked by CoinDesk, 26 were rising late Wednesday afternoon.

The pain in cryptocurrency markets has been broad. The price of ether, the in-house currency of the Ethereum network, fell as low as $1,013 on Wednesday and was most recently at $1,080, down 9% from its 5 p.m. ET level Tuesday. Cardano’s ada token and even joke cryptocurrency dogecoin slid. Of the top 30 tracked by CoinDesk, 29 were down Wednesday afternoon.

The latest sign of stress and confusion came from a vague tweet from the co-founder of Three Arrows Capital, a hedge fund that invested heavily in cryptocurrencies. “We are in the process of communicating with relevant parties and fully committed to working this out,” the tweet said. No further detail was provided. Three Arrows didn’t respond to a request for comment.

Selloffs continued to batter major U.S. stock indexes, with the S&P 500 entering bear-market territory Friday for the first time in more than two years. WSJ’s Caitlin McCabe looks at some of the key causes behind the market volatility. Photo: John Minchillo/Associated Press

The fall of cryptocurrencies coincides with a selloff in the stock market. Earlier this week, the S&P 500 entered a bear market, defined as a drop of 20% or more from a recent high.

Losses have accelerated in recent days after higher-than-expected inflation data for May sparked worries that the Federal Reserve may need to raise interest rates more aggressively. On Wednesday, the Fed approved a 0.75-percentage-point interest-rate rise and signaled it would continue lifting rates this year at a rapid pace.