Bitcoin Breaks the $20,000 Defense Line
El Salvador embarks on ‘adventure’ to buy more despite investment losses
President of El Salvador Nayb Bukele [이미지출처=연합뉴스]
[아시아경제 김나연 인턴기자] The virtual asset market is falling without knowing the bottom. Bitcoin collapsed at the $20,000 level (about 25.96 million won). Bitcoin, which had been moving sideways while maintaining around 27 million won, has finally turned to a downtrend.
The reason for this downtrend is inflation and the bankruptcy of 3AC, a virtual asset hedge fund. Three Arrows Capital (3AC), a hedge fund famous for its cryptocurrency investment giant, has been declared bankrupt.
3AC is a large hedge fund that borrowed money from various companies to continue investing in virtual assets. However, according to digital asset broker Voyager Digital, 3AC failed to redeem USDC, a stablecoin valued at US$350 million (approx. appear.
CNBC reported on the 29th (local time) that 3AC was declared bankrupt by a court in the British Virgin Islands on the 27th. The decisive cause of bankruptcy was the liquidation of loans from cryptocurrency lenders.
3AC has invested heavily in cryptocurrencies in the meantime. It started with a $1.2 million (1.5 billion won) fund in 2012 and has grown to $3 billion (3.8 trillion won) in April. However, they invested about 200 million dollars (260 billion won) in the domestic coin Luna, but they were hit directly by the collapse of Terra and Luna. Afterwards, the cryptocurrency market faltered and most of the assets invested in a leveraged way were liquidated.
3AC’s bankruptcy news broke Bitcoin’s $20,000 defense line. According to CoinMarketCap, a cryptocurrency market relay site, the price of Bitcoin fell to the level of $19,400 as of 5 pm on the 30th.
According to the Wall Street Journal (WSJ), “The loss from the Luna incident was large enough to be tolerated by 3AC, but it could not withstand the crash of the entire cryptocurrency market, which was triggered by the Luna Foundation selling a large amount of Bitcoin to defend the price of Terra.”
The total market capitalization of cryptocurrencies has long been below $1 trillion. According to CoinMarketCap, it fell from $1.311 trillion (about 1701 trillion won) at the beginning of this month to $869.9 billion (about 1128 trillion won) as of 5 pm on the 30th. That’s $441.9 billion evaporated in one month.
The WSJ diagnosed that the current DeFi (Decentralized Finance) system, which conducts cryptocurrency lending business, is a much more serious situation than the investment bank speculation that caused the Lehman Brothers crisis in 2008.
The cold season that has come to the cryptocurrency market is expected to continue for a while. A growing number of experts are also predicting that the Bitcoin price could plunge further after the $20,000 collapse.
In an interview with CNBC on the 29th, Mark Newton, chief strategist at Fundstrat, a Wall Street investment analysis firm, predicted that the price of bitcoin has been falling day by day, but it has not yet reached a bottom. “Analysis of the graph shows that a large liquidation of Bitcoin remains,” he said.
Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad, tweeted on the 28th, “Bitcoin could plummet to $1,100. It will be a great low-priced buying opportunity for some.”
Meanwhile, El Salvador, on the verge of bankruptcy, bought an additional 80 bitcoins.
On the 1st, El Salvador President Naive Bukele tweeted, “Today, El Salvador bought 80 Bitcoins (BTC) at $19,000 each.” “Bitcoin is the future. Thank you for selling it at a low price.” .
Along with these remarks, President Bukele disclosed the details of the Bitcoin transaction signed at $19,000.
Earlier, President Bukele tweeted on the 20th of last month, “There seems to be some people who are worried or anxious about the bitcoin price.
“Bitcoin investing is safe,” he said. “Bitcoin price is going to go up tremendously after the bear market ends. Patience is key.” President Bukele has shown unlimited confidence in Bitcoin.
Meanwhile, it is known that the El Salvador government will have to repay about 800 million dollars (about 1.34 trillion won) of government bonds. If the bond maturity is not paid before January next year, it will face a default crisis.
In February, credit rating agency Fitch downgraded El Salvador’s long-term debt rating from ‘B-‘ to ‘CCC’. This falls into the category of ‘the default is realistically possible’. El Salvador became the first country in the world to adopt Bitcoin as a fiat currency in September last year.
El Salvador’s finance minister, Alejandro Gelaya, who is in charge of the treasury, said, “There is no loss because we did not sell a single bitcoin.”
Zelaya also emphasized that Bitcoin investment accounts for only 0.5% of El Salvador’s total assets. However, the AP pointed out that the daily wage of about 20% of El Salvador’s people is only around 5.5 dollars (7,000 won), which is not convincing.
Intern reporter Kim Na-yeon letter99@asiae.co.kr
