Bitcoin struggles to hold onto $27,000 as Tether comes under pressure
Bitcoin price was under pressure again on Thursday, with even bigger losses among smaller cryptocurrencies, as the collapse of the UST stablecoin continued to ripple through the market.
the world’s largest cryptocurrency by market cap, fell 5% to $26,780. The crypto has lost 24% so far this week, and more than 50% from an all-time high reached last November.
Investors were also thwarted by data on Wednesday showing a bigger-than-expected rise in U.S. inflation, leading to another losing day for Wall Street stocks. US Equity Futures ES00,
were lower ahead of Thursday’s open.
The recent market downturn was largely triggered by the collapse of the so-called algorithmic stablecoin TerraUSD, or UST, which is supposed to maintain a one-to-one peg against the US dollar. UST last traded at around 49 cents on Binance, but dipped below 30 cents this week.
UST is backed by another crypto – Luna – through algorithms. Traders are supposed to be able to trade UST for $1 equivalent of Luna, and when UST is trading below $1, holders are incentivized to burn it and hit Luna LUNAUSD,
which also experienced a massive collapse. Luna was trading at 23 cents, a 96% loss in the past 24 hours.
Some blamed a further downward push on the crypto market’s largest stablecoin, Tether USTUSD,
also mentioned by USDT, which was trading below the dollar at as low as 95 cents. A Tether spokesperson recently told MarketWatch that they don’t “believe the UST situation means anything to the centralized stablecoin market. They’re totally different types of assets.
But Tether said Thursday morning that it would complete a $1 billion swap with a third party, adding that Tether’s total supply would remain unchanged.
Lily: TerraUSD crashed. What does this mean for other stablecoins? Here are the potential winners and losers
“Tether is struggling to hold its peg. This hurts all Crypto,” tweeted Jim Bianco, president of Bianco Research. “Trust is drawn in crypto and the risk of contagion is high. Any wobble anywhere sends everyone running. Coinbase does not help! It was down 26% today and talks about bankruptcy. And if so, you lose your coins.
In comments to Twitter on Wednesday, the chief executive of crypto exchange Coinbase Global COIN,
insisted that the company had “no risk of bankruptcy”.
However, he suggested that client assets may lack bankruptcy protection. The comments came on a day when Coinbase earnings indicated a slowdown in trading, and shares are down 48% this week and 78% year-to-date.
The next support level for bitcoin is $25,000, followed by $22,000, Naeem Aslam, chief market analyst at AvaTrade, told investors in a note.
“It is clear that the bulls have lost the battle and the selling pressure is very strong. The big question for traders is whether the current sell-off will shock Hodler,” Aslam said. “HODL,” which is popular among crypto enthusiasts, stands for “hold on for life”, investors being called HODLers.
Social media has been flooded with alleged accounts of investors losing huge sums of money due to the collapse of the UST.
— Steve Goldstein contributed to this story