This Thursday, Bitcoin and other cryptocurrencies took a major hit amid a crash of digital assets. The loss has wiped away $600 billion in a market capitalization in just a week.
Bitcoin has fallen 9% in the last 24 hours to a price of $28,000, and dipped to an all-time low of $26,000; the lowest it’s seen since late 2020. The coin has suffered a quarter loss of its value this week and is following a consistent trend downwards.
The damage does not end with Bitcoin. Ethereum, the runner-up most popular digital asset, saw a 20% drop to around $1,900; the lowest it’s been since July 2021. The token underpinning the Ethereum network has lost one-third of its overall value in the past week.
Altcoins Brushed By Death
An even darker shade of red is being seen amongst altcoins, the smaller tokens of the crypto-ecosystem with Solana, Cardano, and Avalanche all falling 25% to 30% this week.
Coins that were originally intended as internet jokes rather than serious blockchain projects were also brushed by death, with Dogecoin and Shiba coin both losing about 25%.
Stablecoins Under Immense Pressure
A dramatic turn for cryptocurrency as Tether, which is meant to serve as a stable coin and maintain a 1:1 peg with the U.S. dollar– fell in value to a trading value of 96 cents to the dollar.
Stablecoins play an important part in the cryptocurrency world as they are meant to provide stability to traders and the market, and they currently make up about 90% of all digital asset trading volumes. These coins are a main medium of exchange for payments, trading, lending, and other types of transactions on the blockchain.
The coin Tether is meant to be backed 1:1 by real assets, but unlike Tether, the coin TerraUSD, an apparent algorithmic stablecoin that uses financial engineering and an assortment of opportunity with another token, Luna, to maintain its peg. TerraUSD’s meltdown in the past week, when it traded as low as a quarter on the dollar, has worsened the latest crypto selloff.
Stablecoins haven’t been isolated in their downward force in the crypto market.
While theoretically Bitcoin and other coins should trade independently of other traditional financial markets, they have shown to be greatly correlated with the stock market, moreso tech stocks.
The stock market in itself has been going through its own barrage of issues and volatility amid anticipation that the Federal Reserve will be moving aggressively to control inflation at a multi-decade high, with the risk being that swiftly rising borrowing costs could elicit a recession.
These sorts of conditions significantly threaten sentiments among “risky” assets like cryptocurrencies and tech sector stocks.
