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“There is a lot of credit being taken out of the system and if banks have to absorb losses of Celsius and Three Arrows, they will reduce the size of their exposures, which means that the entire amount of credit available in the cryptocurrency ecosystem will be greatly reduced,” he said. Adam Farthing, chief risk officer for Japan at digital asset liquidity provider B2C2.

"It feels very 2008 to me in terms of how there can be a domino effect of bankruptcies and liquidations," Farthing said.

Smaller cryptocurrencies, which often follow the movement of bitcoin, were also affected. Ether was down 0.23% to $1,124 on Monday, having dropped below its own symbolic $1,000 level over the weekend.

The slump in cryptocurrency markets coincided with a recent pullback in equity markets amid rising interest rate concerns and growing likelihood of recession.

Bitcoin's movements tend to follow a similar pattern to other risky assets such as tech stocks.

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