Cryptocurrencies nursed large losses on Friday, with bitcoin pinned below $ 30,000 and set a record losing streak as the collapse of TerraUSD, a so-called stablecoin, rippled through markets.
Crypto assets have also been swept up in broad selling of risky investments about high inflation and rising interest rates. Sentiment is particularly fragile, however, as tokens are supposed to be pegged to the dollar have faltered.
Bitcoin, the largest cryptocurrency by total market value, attempted a bounce early in the Asia session and rose 2% to $ 29,500, recovering something from a 16-month low of around $ 25,400 on Thursday.
It’s been a long way down week-ago levels of around $ 40,000 and, although there is a rebound in weekly trade, is headed for a record seventh consecutive weekly loss.
“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong-based firm that runs a crypto index fund.
“I think there is more downside in the coming days. I think what we need to see is an open interest collapse a lot more, 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 to the dollar this week, remaining stable for its mechanism, using another digital token, failed under selling pressure. It last traded below 10 cents.
Tether, the biggest stablecoin and one whose developers say backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data. read more
Selling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions on stablecoins.
These are tokens pegged to the value of traditional assets, often the US dollar, and are the main medium for moving money between cryptocurrencies or converting balances to fiat cash.
“Over half of all bitcoin and ether traded exchanges are against a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.
“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets. They will be able to sell at times of market stress.”
Tether has recovered to parity the dollar and its operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other money-market products.
But it is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation.
Ether, the second-largest cryptocurrency by market capitalization, steadied near $ 2,000 on Friday after dropping as low as $ 1,700 on Thursday. Bitcoin and ether are about 60% below record peaks in November.
Crypto-related stocks have also copped a pounding, with shares in broker Coinbase (COIN.O) steadying overnight but still down by more than half 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, eyed weekly drops of more than 15%.
Amid the turmoil, Nomura (8604.T) on Friday said it was offering bitcoin derivatives to clients, the latest move by a traditional financial institution into the asset class.
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