The collapse of TerraUSD, one of the world’s largest stablecoins, sent shockwaves through crypto markets on Thursday, pushing another major stablecoin, Tether, below its dollar peg and sending Bitcoin at a minimum of 16 months.
Cryptocurrencies have been dragged down by a sell-off in riskier assets, which has gathered momentum this week as data showed that US inflation. The sell-off has pushed the combined market value of all cryptocurrencies to 1, 2 billion dollars (1.16 billion euros), less than half of what it was last November, according to data from CoinMarketCap.
Bitcoin, the largest cryptocurrency by market cap, hit a low of $25,401.05 on Thursday, its lowest level since late December 2020, before recovering slightly later in the session to trade flat on the day they closed. European markets. Over the past eight sessions it has lost more than a quarter of its value, or about $10,700, and is down 37% year-to-date, trading well below the $69,000 peak it reached in November 2021. .
Bitcoin’s correlation with the Nasdaq Composite has been on the rise recently and is now near its all-time high, according to Refinitiv data. The Nasdaq Composite is down about 8 percent so far this month. Ether, the world’s second largest cryptocurrency, fell to its lowest level since June 2021, sinking as low as $1,700. Unlike previous financial market sell-offs, when cryptocurrencies were largely untouched, the selling pressure on these assets this time around has undermined the broader argument that they are reliable stores of value amid market volatility. .
Stablecoin TerraUSD has been hit by the turmoil and broke its peg against the dollar, leading it to drop as low as 31 cents on Wednesday. On Thursday it was trading around 47 cents. Stablecoins are digital tokens pegged to the value of traditional assets, such as the US dollar. But TerraUSD is an algorithmic or “decentralized” stablecoin, and it was supposed to maintain its peg to the dollar through a complex mechanism that involved swapping it with another free-floating token.
“The parity collapse on TerraUSD has had some nasty and predictable side effects. We have seen a broad sell-off in BTC, ETH and most ALT coins,” said Richard Usher, head of OTC trading at BCB Group, referring to other cryptocurrencies. – Reuters