Crypto suffered huge losses; Bitcoin returns more than $ 30,000

The cryptocurrency suffered heavy losses on Friday, with Bitcoin falling back above $ 30,000, while the so-called stablecoin, still known as TEROS, fell to record levels after waves through the crypto market.

Crypto assets have also been widely sold as venture capital due to concerns about high inflation and rising interest rates. Sentiment weakened as the currency depreciated against the US dollar.

Bitcoin, the largest cryptocurrency by total market capitalization, was able to bounce back in the Asian session, trading at around $ 30,500 at 11:40 GMT. It rose to a 16-month low of $ 25,400 on Thursday.

But it is still well below the $ 40,000 level a week ago and, with the exception of a rebound in weekend trading, it leads to record losses for the seventh week in a row.

“I do not think the worst is over,” said Scottie Siu, director of investment at Axion Global Asset Management in Hong Kong.

“I think there will be more headwinds in the next few days. I think what we need to see is a further decline in open interest, so I think speculators are really out and the market will settle by then.

Beyond Bitcoin

The brokerage coinbase COIN.O was steady overnight, but crypto-related stocks were hurt by a slight downturn in a week.

In Asia, both Hong Kong-listed Huobi Technology 1611.HK and BC Technology Group 0863.HK, which operates trading platforms and other crypto services, fell more than 20% on a weekly basis.

But broader financial markets have so far seen little of the impact of the cryptocurrency collapse.

“Cryptocurrencies are still small and cryptocurrency consolidation in broader financial markets is still very low,” said James Malcolm, head of forex strategy at UBS.

“The idea of ​​what happened in cryptocurrencies is still in cryptocurrencies – and in many ways, we still do.”

stablecoin squeeze

The global market cap of cryptocurrency has fallen by almost half since November, but the fall in recent sessions has led to panic as stable coins have come under pressure.

Stable coins are the primary means of transferring funds between tokens and cryptocurrencies for the value of traditional assets (usually US dollars) or converting balances into fiat cash.

This week, the cryptocurrency market was shaken by the fall of the TeraUSD (UST) against the US dollar. The dollar broke 1: 1 peg.

When Luna was under selling pressure, the complex stability mechanism of the coin balancing with a free-floating cryptocurrency called Luna stopped working. TeraUSD is finally trading at 9 cents while Luna is trading near zero.

According to CoinMarketCap, Tether, the largest stable coin that developers say is supported by US dollar assets, was also under pressure, falling 95 cents on Thursday but returning to $ 1 on Friday.

“More than half of all bitcoins and ethers traded on the exchanges are against stabilcoins, with USDT or tether being the lion’s share,” analysts at Morgan Stanley said in a research note.

“For these types of stable coins, the market needs to believe that the issuer has enough liquid assets to sell under market pressure.”

Tether’s operating company has significant assets in US treasuries, cash, corporate bonds and other money market products.

Tether will face further testing if traders continue to sell, analysts worry, as it could spread to currency markets if it forces further liquidations.

Rating agency Fitch said in a report on Thursday that cryptocurrencies and digital finance could have a “significant negative impact” if investors lose faith in stable coins.

“Most regulated financial institutions have increased their exposure to cryptocurrencies, defi and other types of digital finance in recent months, and some Fitch-rated issuers will be affected if cryptocurrency market volatility becomes severe,” it said.

However, Fitch said the weak link between crypto markets and regulated financial markets limits the potential for volatility in the crypto market to lead to widespread financial instability.

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