Bitcoin fell further below the $ 30,000 mark as investors fled cryptocurrencies.
Jaap Arriens | NurPhoto | Getty pictures
Bitcoin fell below $ 27,000 on Thursday for the first time in over 16 months, as cryptocurrency markets increased losses due to fears of rising inflation and the collapse of a controversial stablecoin project.
The price of bitcoin plunged as low as $ 26,595.52 on Thursday morning, according to Bitstamp data. This is the first time bitcoin has fallen below the $ 27,000 level since December 30, 2020.
As of 01[ads1]:30 ET, bitcoin traded at $ 27,061, down 15% in the last 24 hours.
Ether, the second largest digital currency, went down to as low as $ 1789 per coin. This is the first time the token has fallen below the $ 2000 mark since July 2021.
Ether was last down 23% at a price of $ 1,852.
Investors are fleeing cryptocurrencies at a time when stock markets have plummeted from the top of the coronavirus pandemic due to fears of high prices and deteriorating economic prospects. US inflation data on Wednesday showed that prices of goods and services jumped 8.3% in April, higher than expected by analysts and close to the highest level in 40 years.
The demise of the controversial stablecoin protocol Terra also weighs on traders’ minds.
TerraUSD, or UST, is intended to reflect the value of the dollar, but it plunged below 30 cents on Wednesday, shaking investors’ confidence in the so-called decentralized financial area.
Stablecoins are like the bank accounts of the barely regulated crypto world. Digital currency investors often turn to them for security in times of market volatility.
But UST, an “algorithmically” stable coin backed by code instead of cash kept in a reserve, has struggled to maintain a stable value as holders have romped for the exit galore.
As of Thursday morning, UST was trading at around 62 cents, still well below the intended $ 1 stick.
Luna, another Terra token that has a floating price and is meant to absorb UST price shock, erased 97% of its value in 24 hours and was last worth only 30 cents – even less than UST.
Investors are afraid of the implications for bitcoin. The Luna Foundation Guard – a fund created by Terra creator Do Kwon – had amassed a pile of multi-billion dollar bitcoin to support UST in times of crisis.
The fear is that Luna Foundation Guard will sell a large part of its bitcoin holdings to support its ailing stable coin. It is a risky game, not least because bitcoin itself is an incredibly volatile resource.
On Thursday, investors’ fears intensified a fall in the value of tether, the world’s largest stable currency. The token fell below 99 cents at one point. Economists have long feared that tether may not have the necessary amount of reserves to strengthen the dollar party in the event of mass withdrawals.