Bitcoin loses streak as ‘stablecoin’ collapses and crushes crypto
The cryptocurrency suffered huge losses on Friday, with Bitcoin pinned below $ 30,000, and the fall of the so-called stablecoin, TerraUSD, led to record losses in the market.
Concerns over high inflation and rising interest rates have also boosted crypto assets in the widespread sale of risky investments. The sentiment is particularly fragile, however, as tokens pegged to the dollar have dwindled.
Bitcoin, the largest cryptocurrency by total market value, attempted to bounce back early in the Asian session, rising 2% to $ 29,500, recovering from a 16-month low of around $ 25,400 on Thursday.
It is well below the level of about $ 40,000 a week ago and is headed for a seventh consecutive weekly loss until the weekend returns.
“I don’t think the worst is over,” said Scotty Siu, investment director at Axion Global Asset Management, a Hong Kong-based firm that runs crypto index funds.
“I think there are more downsides in the coming days. I think open interest rates need to fall further, so the speculators are really out of it and that’s when I think the market will stabilize.”
TerraUSD (USDT) broke its 1: 1 peg against the dollar this week as its stabilization mechanism, using another digital token, failed under selling pressure. It last traded below 10 cents.
According to CoinMarketCap data, Tether, the largest stablecoin and whose developers say is supported by dollar assets, has also come under pressure and dropped to 95 cents on Thursday.
The global market value of the cryptocurrency has nearly halved since November due to sales, but the fall on stablecoins has frightened the downturn in recent sessions.
These are tokens based on the value of traditional property, often in the U.S. Dollars, and cryptocurrencies are the main means of moving money or converting balances into fiat cash.
Analysts at Morgan Stanley said in a research note that “more than half of all bitcoins and ethers traded on the exchange are against stablecoins, with USDT or Tether having the largest share.”
“For these types of stablecoins, the market needs to believe that the issuer has enough liquid assets that they will be able to sell in times of market stress.”
Tether has equaled the dollar and its operating company says it has the necessary assets in treasury, cash, corporate bonds and other money-market products.
But analysts are concerned that further tests could be carried out if traders continue to sell, and that the pressure could lead to more liquidity, leading to tensions in the money market.
Ether, the second-largest cryptocurrency by market capitalization, stabilized near $ 2,000 on Friday after falling as low as 7 1,700 on Thursday. Bitcoin and Ether are down about 60% from their November record highs.
Shares in the broker Coinbase (COIN.O) remained stable overnight, but crypto-related stocks also fell sharply, but still fell by more than half in just over a week.
In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, have more than 15% weekly drops.
Amid the uproar, Nomura (8604.T) said on Friday that it has begun offering Bitcoin derivatives to customers, the latest move in the traditional financial institution’s asset class.