Bitcoin went below $26,000 for the first time in 16 months, as part of a bigger cryptocurrency sell-off that wiped off more than $200 billion from the whole market in a single day.
According to Coin Metrics, the price of bitcoin fell as low as $25,401.29 on Thursday morning. This is the first time the cryptocurrency has fallen below $27,000 since December 26, 2020. Bitcoin has now recovered some of its losses and was last trading at $29,413.08, a 0.1 percent decrease.
Ether, the second-most valuable digital currency, fell to as low as $1,704.05 per coin. It’s the first time the token has dropped below $2,000 since June 2021. Ether was last trading at $1,988.45, down 6.5 percent.
Investors are abandoning cryptocurrencies at a time when stock markets have plummeted from the coronavirus pandemic’s highs due to concerns about rising prices and a poor economic outlook.
Inflation in the United States rose 8.3 percent in April, above analysts’ expectations and approaching the highest level in 40 years, according to figures released Wednesday.
The demise of the controversial stable coin system Terra is also on traders’ thoughts. TerraUSD, or UST, is intended to reflect the value of the US dollar.
However, it fell to less than 30 cents on Wednesday, causing investors to lose faith in the so-called decentralized finance area.
Stable coins are the crypto world’s equivalent of bank accounts. In times of market instability, digital currency investors frequently resort to them for safety.
However, UST, a “algorithmic” stable coin backed by code rather than cash held in reserve, has struggled to maintain a stable value as holders fled in droves.
On Thursday, UST was trading at around 33 cents, still significantly below its target price of $1.
Luna, another Terra token with a floating price and intended to absorb UST price shocks, has lost 99 percent of its value and is now worth only one penny.
Investors are concerned about bitcoin’s future. The Luna Foundation Guard, a fund established by Terra founder Do Kwon, had built a multibillion-dollar bitcoin stash to assist UST in times of need. The concern is that Luna Foundation Guard will sell a big percentage of its bitcoin assets to shore up its floundering stablecoin. That’s a dangerous bet, not least because bitcoin is an extremely volatile asset.
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