Crypto Weekly: DeFi deflates

STORY: This is Crypto Weekly, with your top stories on alternative currencies. This week, bitcoin takes another battering, and why DeFi is deflating.

Bitcoin is under pressure again. Over the weekend it sank below the $20,000 level for the first time since late 2020.

Traders say mounting troubles at major crypto firms are the worry now.

Hedge fund Three Arrows Capital and lender Babel Finance are the latest to hit difficulty.

Further rate hikes in the U.S. don’t help either.

Michael Vogelzang is chief investment officer at CAPTRUST:

“The Federal Reserve controls the price of money, which is interest rates. When the Fed came out last fall and said we have to shrink the balance sheet of the Federal Reserve, and we’re going to tighten the interest rates to fight inflation, the game changed, crypto began to sell off.”

The crypto collapse is also rocking the world of DeFi - that’s decentralized finance, or lending and other financial products using crypto currencies.

The total value of tokens deposited in such products is down 60% over the past six weeks according to one metric.

Source: Glassnode

DeFi began to deflate after the crash of stablecoin TerraUSD, which rocked investor confidence in the sector.

And Elon Musk faces yet more legal headaches.

The Tesla founder is being sued for $258 billion by an investor who accuses him of manipulating the market for Dogecoin.

Keith Johnson says Musk ran a pyramid scheme, driving up the price of the token when he knew it had no real value.

Musk calling Dogecoin a “hustle” on Saturday Night Live, may not help the defense.