Cryptocurrencies fall and bitcoin is at its lowest level in 16 months, when the panic of so-called stablecoins (cryptocurrencies whose value is permanently linked to the value of a commodity in circulation, such as gold or official currency) caused market shocks, Reuters reported.
The world’s largest cryptocurrency fell to $25,401.05. – the lowest level since December 28, 2020. Over the past eight sessions, Bitcoin has lost a third of its value, or $13,000. and this year it has fallen by more than 45%. From the top, $69,000. in November 2021, it lost nearly two-thirds of its value, Reuters reported.
bitcoin is down
The deathblow to Bitcoin and its smaller rival Ether, which has lost more than half of its market value this year, was this week’s crash of TerraUSD, also one of the largest cryptocurrencies in the world. world. The TerraUSD – also known as “UST” – fell below its 1:1 peg to the dollar this week. It came as a shock to the cryptocurrency market, which was already under pressure with falling stock markets, Reuters explained.
“The Terra incident is creating panic in the industry as Terra is the third largest ‘stable coin’ in the world,” said Ipek Ozkardeskaya, principal analyst at Swissquote Bank. He added that TerraUSD “could not deliver on its promise to maintain a stable value of the US dollar.”
Stablecoins are digital tokens linked to the value of traditional assets such as the US dollar. They are popular during turbulent times in the cryptocurrency markets and are often used by investors to move funds and speculate on other cryptocurrencies, Reuters explained.
The collapse of TerraUSD resonated in broader markets and other stablecoins such as Tether also came under pressure. According to exchange CoinMarketCap, TerraUSD was trading at 56 cents on Thursday and Tether at 95 cents, below $1, Reuters reported.
Investors are gauging the effects of the TerraUSD collapse to determine whether big business or investors have suffered. This could be one of the signs of deepening problems – noted Reuters.
Ether, the world’s second largest cryptocurrency, fell nearly 15% on Thursday. up to $1,700, its lowest level since June 2021.
Unlike previous episodes of sell-offs in broad financial markets, where cryptocurrencies remained largely untouched, the pressure to sell off these assets this time undermined the argument that they are reliable stores of value in the face of market volatility. , reported Reuters.
The sell-off of cryptocurrencies was driven by a discouraging macroeconomic backdrop of rising inflation and interest rates that sent shockwaves through the tech sector, dragging cryptocurrencies with it. Confirming that Bitcoin and other cryptocurrencies do not serve as an inflation hedge, said Victoria Scholar, Chief Investment Officer at Interactive Investors.
Cryptocurrencies are popular due to their relative anonymity and fluctuations in value, which create opportunities for greater profits than investing in traditional global exchanges. However, bitcoin’s volatility and unclear legal status raise doubts as to whether it could ever truly replace traditional currencies in everyday transactions.
Few months ago Paweł Borys, the chairman of the Polish Development Fund, warned against investing in bitcoin. He said one should be careful not to invest a significant portion of one’s savings. He also referred to tulipomania, known as the oldest stock market bubble – it took place in the 17th century.
The Polish Financial Supervisory Authority also warned against investing in cryptocurrencies. The Polish Financial Supervisory Authority pointed out that they are associated with high risk and that the market itself is unregulated. This means that there are no detailed and systemic solutions that guarantee the safety of investors operating there. The bureau also reported that the cryptocurrency and crypto-asset market is characterized by high volatility.
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