Bitcoin recovered after diving to an 18-month low, buoyed by the U.S. Federal Reserve's tough stance on inflation even in the midst of a market meltdown this week after crypto lender Celsius froze customer withdrawals.
The world's largest cryptocurrency fell as much as 7.8% to $20,079.72, its lowest since December 2020. It has lost about 33% against the U.S. dollar since Friday, dropping more than 50% since the beginning of the year. It has slumped about 70% from its record high of $69,000 in November.
Bitcoin was last down 1.31% at $21,669.37.
The digital currency sector has been pummeled this week after Celsius froze withdrawals and transfers between accounts, stoking fears of contagion in markets shaken by the demise of the terraUSD and luna tokens last month.
Cryptocurrencies were buoyed as the S&P 500 rallied after a policy announcement by the Fed to raise interest rates, snapping a five-session losing skid.
The Fed raised its target interest rate by three-quarters of a percentage point, its biggest rate hike since 1994.
Crypto funds saw outflows of $102 million last week, according to digital asset manager CoinShares, citing investors' anticipation of tighter central bank policy.
The value of the global crypto market has tumbled 70% to under $900 billion from a peak of $2.97 trillion in November, CoinMarketCap data shows.
"Some parts of the broader crypto ecosystem are facing a rather harsh reckoning," said Mikkel Morch, executive director at digital asset hedge fund ARK36. "As the reality of the bear market starts to settle in, the hidden leverages and structural weaknesses of projects that only worked when the prices went up are finally brought to light."
Celsius has hired restructuring lawyers and is looking for possible financing options from investors, the Wall Street Journal reported, citing people familiar with the matter. Celsius is also exploring strategic alternatives including a financial restructuring, it said.
Smaller cryptocurrencies, which tend to move in tandem with bitcoin, also fell. Ether, the second largest token, fell to as low $1,013, the lowest since January 2021, and was last down 1.22% at $1,172.76.
The chaos in the crypto market has spread to other companies, with a number of exchanges slashing workforces.
Major U.S. exchange Coinbase Global Inc (COIN.O) said on Tuesday it would cut about 1,100 jobs, or 18% of its workforce. Gemini, another U.S. exchange, said this month it would cut 10% of its workforce.
Still, others continue to hire. Binance, the world's largest exchange, said it was hiring for 2,000 positions, and U.S. exchange Kraken said it had 500 roles to fill.
"Hunker down," tweeted Binance CEO Changpeng Zhao.
Crypto hedge fund Three Arrows, facing social media chatter it is facing liquidation issues, said it was committed to working things out.
U.S. crypto broker Genesis also sought to ease investor concerns, saying its balance sheet was strong and its lending business continued to meet client demand despite elevated market volatility.