Bitcoin eyes register loss series as ‘stablecoin’ collapse shatters crypto

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustration image, 14 February 2018. REUTERS / Dado Ruvic / Illustration

SINGAPORE, May 13 (Reuters) – Cryptocurrencies suffered heavy losses on Friday, with bitcoin pegged below $ 30,000 and set a record high of losses as the collapse of TerraUSD, a so-called stack coin, swept through markets.

Crypto-assets have also been swept up in broad selling risky investments due to concerns about high inflation and rising interest rates. However, sentiment is particularly fragile, as tokens linked to the dollar have faltered.

Bitcoin, the largest cryptocurrency in terms of total market value, attempted a bounce early in the Asian session, rising 2% to $ 29,500, something of a recovery from a 16-month low of around $ 25,400 reached on Thursday.

It is still well below last week’s levels of around $ 40,000, and unless there is an increase in weekend trading, it is heading for a record seventh weekly loss in a row.

“I do not think the worst is over,” said Scottie Siu, chief investment officer at Axion Global Asset Management, a Hong Kong-based crypto-index fund firm.

“I think there are more disadvantages in the next few days. I think what we need to see is that the open interest collapses a lot more, so the speculators are really out of it, and that’s when I think the market will stabilize.”

TerraUSD (USDT) broke its 1: 1 bond to the dollar this week, as the mechanism to remain stable, using another digital token, failed under selling pressure. It was last traded below 10 cents. read more

Tether, the largest stable currency and one whose developers say it is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data. read more

UNSTABLE

Sales have roughly halved the global market value of cryptocurrencies since November, but the decline has turned into panic in recent sessions with pressure on stack coins.

These are tokens related to the value of traditional assets, often US dollars, and are the main medium for moving money between cryptocurrencies or for converting balances to fiat cash.

“Over half of all bitcoin and ether traded on exchanges are against a stable currency, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stable coins, the market must trust that the issuer has sufficient liquid assets that they will be able to sell in times of market stress.”

Tether has returned to parity on the dollar and the operating company says it has the necessary assets in government bonds, cash, corporate bonds and other money market products.

But it is likely to face further tests if traders continue to sell, and analysts are concerned that stress could spread to money markets if pressure forces more and more liquidation.

Ether, the second-largest cryptocurrency by market value, stabilized near $ 2,000 on Friday after falling as low as $ 1,700 on Thursday. Bitcoin and ether are about 60% below record highs reached in November.

Crypto-related stocks have also taken a hit, with stocks in the broker Coinbase (COIN.O) stabilizing overnight, but still halving in just over a week.

In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, observed weekly declines of more than 15%.

In the midst of the turmoil, Nomura (8604.T) said on Friday that they had started offering bitcoin derivatives to customers, the latest move from a traditional financial institution to the asset class.

Reporting by Tom Westbrook and Alun John.

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