Bitcoin’s Price Falls Below $20,000

There is no specific significance to the $20,000 level, but the price slid below $19,783, a previous high water mark hit in 2017, according to Coinbase. Bitcoin bulls have long held that the cryptocurrency had in recent years entered a new stage of development and acceptance, and that it wouldn’t fall below that 2017 level.

“It will be a lot of pain for a lot of investors,” said Yuya Hasegawa, a market analyst at Japanese crypto exchange Bitbank Inc. People will lose confidence in the crypto market as a whole, but seasoned crypto investors and those who believe in its long-term prospects will see an opportunity to buy at discounted prices, he said.

Ether, another major cryptocurrency, fell below $1,000, briefly reaching $975.35 on Saturday, according to CoinDesk, its lowest level since January 2021.

Bitcoin’s slide from its record high of $67,802 in November has contributed to a roughly $2 trillion wipeout in the broader market. Crypto’s total market capitalization, which peaked in November at nearly $3 trillion, stood at around $840 billion Saturday—its lowest since January 2021, according to data provider CoinMarketCap.

Bitcoin traded around the $30,000 mark for most of May before dropping sharply again in June after a fresh inflation shock and worries about rising U.S. interest rates. Investors have been unloading assets seen as risky, such as cryptocurrencies and technology stocks.

Individual investors have received margin calls, with about $260 million of collateral pledged by about 80,000 retail traders liquidated over the past 24 hours, according to data provider CoinGlass. That compares with $1 billion earlier this week.

A growing number of previously highflying crypto firms have been feeling the pain in what has been dubbed a “crypto winter.” Cryptocurrency lender Babel Finance told customers Friday that it was suspending redemptions and withdrawals from all products, citing “unusual liquidity pressures.” One of the largest crypto lenders, Celsius Network LLC, hasn’t let users withdraw funds for roughly a week, citing extreme market conditions.

Cryptocurrency-focused hedge fund Three Arrows Capital Ltd. has hired legal and financial advisers to help work out a solution for its investors and lenders after suffering heavy losses from a broad market selloff in digital assets, the firm’s founders told The Wall Street Journal.

The surge in cryptocurrency valuations over the last two years was aided by big-name investments from companies such as

Tesla Inc.

and a period of lower interest rates during the pandemic that encouraged individuals stuck at home to buy riskier assets in the hopes of greater returns.

Interest-rate increases now being enacted by the Fed come at a time when blowups in some crypto projects have rippled across the ecosystem. So-called stablecoin TerraUSD broke from its $1 peg last month following intense selling pressure, leaving it and its original sister cryptocurrency Luna now nearly worthless. As its developers sought to defend TerraUSD’s peg, they sold bitcoin reserves, weighing on the price of it and other assets.

Crypto investors more recently have become concerned about a derivative of the cryptocurrency ether that is locked up until the Ethereum network transitions to a less energy-intensive model. So-called Lido-staked ether has been trading at a discount to ether itself recently.

“Crypto has enough problems. It doesn’t need the macro,” said Noelle Acheson, head of market insights at crypto lender Genesis Global Trading, in reference to rising interest rates and inflation concerns.

Write to Elaine Yu at elaine.yu@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com