Bitcoin plummeted further below the $ 30,000 mark as investors fled cryptocurrencies.
Jaap Arriens | SoloFoto | Getty Images
Bitcoin It plunged below $ 27,000 on Thursday for the first time in over 16 months as cryptocurrency markets extended their losses amid fears of rising inflation and the collapse of a controversial stablecoin project.
Bitcoin’s price plunged to $ 26,595.52 on Thursday morning, according to Bitstamp data. This marks the first time that bitcoin has dropped below the $ 27,000 level since December. 30, 2020.
At 1:30 am ET, bitcoin was trading at $ 27,061, down 15% in the past 24 hours.
ether, the second largest digital currency, has dropped as low as $ 1,789 per coin. This is the first time the token has dropped below the $ 2,000 mark since July 2021.
Ether fell 23% to a price of $ 1,852.
Investors are fleeing cryptocurrencies at a time when equity markets have plummeted from the highs of the coronavirus pandemic amid fears of soaring prices and deteriorating economic outlook.
US inflation data released Wednesday showed prices for goods and services jumped 8.3% in April, more than analysts expected and close to the highest level in 40 years.
The fall of the stablecoin Terra protocol is also weighing on the minds of traders.
TerraUSDor UST, is expected to reflect the value of the dollar, but it plummeted to less than 30 cents on Wednesday, shaking investor confidence in the so-called decentralized financial space.
Stablecoins are like the bank accounts of the newly regulated cryptocurrency world. Digital currency investors often turn to them for safety in times of market volatility.
But UST, an “algorithmic” stablecoin backed by code rather than cash held in a reserve, struggled to maintain a stable value as holders flocked to exit.
As of Thursday morning, UST was trading around 62 cents, still well below the expected $ 1 peg.
moonanother Terra token which has a variable price and is meant to absorb UST’s price shocks, wiped out 97% of its value in 24 hours and was last time only worth 30 cents, even less than UST.
Investors fear the implications for bitcoin. Luna Foundation Guard, a fund set up by the creator of Terra Do Kwon, had amassed a stack of multi-billion dollar bitcoins to help support UST in times of crisis.
The fear is that Luna Foundation Guard will sell most of its bitcoin holdings to support its ailing stablecoin. This is a risky bet, not least because bitcoin itself is an incredibly volatile asset.
Adding to investor fears on Thursday was a drop in the value of tether, the largest stablecoin in the world. The token at one point dropped below 99 cents. Economists have long feared that tether may not have the amount of reserves needed to strengthen its dollar peg in the event of mass withdrawals.