A breakdown this week in TerraUSD, another of the world’s largest cryptocurrencies, dealt the latest blow to Bitcoin and its smaller competitor Ether, which has lost more than half its market value so far this year.
Bitcoin fell to $25,401.05, its lowest level since December 28, 2020. It has lost a third of its worth, or $13,000, in the last eight sessions, and is down more than 45 percent this year. continue reading
It has lost over two-thirds of its value since peaking at $69,000 in November 2021.
This week, TerraUSD, commonly known as “UST,” fell below its 1:1 peg to the dollar, unsettling cryptocurrency markets that were already under pressure from falling stock markets.
“The collapse of the TerraUSD peg has had some severe and anticipated consequences. BTC, ETH, and most ALT currencies have undergone widespread liquidation “According to Richard Usher, head of OTC trading at BCB Group, the actions are reminiscent of the 2008 financial crisis’ bank runs.
Stable coins are digital currencies that are linked to conventional assets like the US dollar. They’re popular during periods of market upheaval, and traders use them to shift money around and speculate on other cryptocurrencies.
According to CoinGecko price statistics, TerraUSD was trading at roughly 50 cents on Thursday.
TerraUSD is an algorithmic, or “decentralized,” stable currency, unlike other stable currencies that are backed by reserves. It was designed to keep its peg by replacing it with another free-floating token through a complicated method.
On Thursday, though, even reserve-backed stable currencies, which claim to have adequate assets to sustain their pegs, showed indications of stress.
Tether, a major stable coin, fell below its dollar peg on Thursday, reaching a low of 98 cents around 0732 GMT, according to CoinGecko.
USD Coin was at $1.04, whereas Binance USD was about $1.07, indicating a large departure from its regular range.
“As Terra is the world’s third-largest stable coin, the Terra event is generating an industry-wide fear,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. TerraUSD, on the other hand, “couldn’t keep its promise of maintaining a consistent value in US dollars.”
Market participants are currently examining the consequences of TerraUSD’s demise to see if large corporations or investors have suffered significant losses. That might be a sign of a larger outbreak.
On Thursday, Ether, the world’s second-largest cryptocurrency, fell about 15% to $1,700, its lowest level since June 2021.
Unlike earlier sell-offs in broad financial markets, when cryptocurrencies were mostly unaffected, the selling pressure in these assets has weakened the larger argument that they are reliable repositories of value in times of market instability.