Bitcoin fell below $ 26,000 on Thursday for the first time in 16 months amid a more comprehensive cryptocurrency sell-off that wiped out more than $ 200 billion from the entire crypto market in just one day, CNBC reported.
Earlier in the day, bitcoin fell to $ 25,800, sinking for the first time from $ 26,000 since December 2020. The initial new losses were parried, with the cryptocurrency rebounding to $ 29,500 later in the day, up about 4% in today’s trading session. BNR.
The second-largest digital currency, Ether, collapsed to $ 1,720, briefly breaking below the $ 2,000 level for the first time since July 2021, then returning slightly above the $ 2,000 level, depreciating within the day. nearly 6%.
This led to a collapse in the capitalization of the entire crypto market earlier on Thursday by more than $ 200 billion and more than $ 600 billion in just one week.
From the beginning of May, investors began to flee in panic from cryptocurrencies at a time when stock markets are also under strong pressure from stock sales due to fears of deteriorating economic prospects, as rising inflation forces leading central banks to pursue more aggressive policies of tightening (raising) interest rates to curb inflationary pressures .
The decline in cryptocurrencies is also related to the dramatic reduction in price recently of the so-called “stable coin” TerraUSD, which should reflect the value of the US dollar. On Wednesday, TerraUSD (or UST) fell below 30 US cents, seriously shaking investor confidence in the so-called “decentralized financial space”. Terra bounced back over 80 cents, but on Thursday there was another sharp drop of over 5% to 40 prices ($ 0.40).
The so-called “Stablecoins” that peg their value to one or more official currencies are like the bank accounts of a poorly regulated crypto world. Investors in digital currencies often turn to them as an “investment haven” in times of financial market instability. But TerraUSD, an “algorithmic” stable coin that is backed by code rather than money held in reserve, is struggling to maintain stable value as its holders seek to escape it en masse, CNBC reported.
Luna, another Terra token that has a floating price and is designed to absorb UST price shocks, and deleted 99.5% of its value in 24 hours and last traded for just 1 cent ($ 0.01).
Investors fear the consequences for Bitcoin of this collapse of “stable coins”.
The Luna Foundation Guard, a fund set up by Terra founder Ku Kuon, had amassed billions of dollars in bitcoins to help UST during the crisis. However, the fear is that Luna Foundation Guard is selling a large part of its bitcoins to support its collapsing “stable moment”. This is risky gambling – not least because bitcoin itself is an incredibly price-volatile asset.
The aftermath of Terra’s collapse has led to fears of infecting the entire crypto market.
Tether, the largest “stable coin” in the world, also fell below its one-dollar peg on Thursday to 95 US cents. Economists have long feared that Tether may not have the necessary reserves to strengthen its commitment to the dollar in the event of a massive withdrawal by investors.
–
