The cryptocurrency suffered major losses on Friday, with bitcoin trading near $30,000 and set for a record losing streak as the collapse of TeraUSD, a so-called stablecoin, ripple through the markets.
Rypto assets have also been swamped in widespread selling of risky investments on concerns of high inflation and rising interest rates. Sentiment is particularly fragile, as tokens pegged to the dollar have faltered.
Bitcoin, the largest cryptocurrency by total market cap, managed to bounce back in the Asia session and traded at $30,300 at 0623 GMT, up 5pc.
It made some recovery from a 16-month low of around $25,400 on Thursday.
But it is well below the week ago level of around $40,000 and is heading for its seventh consecutive weekly loss unless there is a rebound in the weekend trading.
“I don’t think the worst is over,” said Scotty Siu, investment director at Axion Global Asset Management, a Hong Kong-based firm that runs cryptocurrency index funds.
“I think there will be further downside in the coming days. I think what we need to see is that there is a further collapse of open interest, so the speculators are really out of it, and when I think the market will stabilize.”
TeraUSD (USDT) broke its 1:1 peg against the dollar this week as its mechanism to stay stable, using another digital token, failed under selling pressure. It was trading close to 10 cents last time.
According to data from CoinMarketCap, Tether, the largest stablecoin and whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, but bounced back to a dollar on Friday. had gone.
Selling has almost halved the cryptocurrency’s global market cap since November, but the decline has turned into a panic in recent sessions with pressure on stablecoins.
These are traditional assets, often tokens pegged to the value of the US dollar, and are the main means of transferring money between cryptocurrencies or converting balances into fiat cash.
“More than half of all bitcoin and ether traded on exchanges are stablecoins, with USDT or Tether accounting for the largest share,” analysts at Morgan Stanley said in a research note.
“For these types of stablecoins, the market needs to trust that the issuers have sufficient liquid assets that they will be able to sell during times of market stress.”
Tether’s operating company says it has essential assets in Treasuries, cash, corporate bonds and other money-market products.
But Tether could face further tests if traders continue to sell, and analysts worry that tensions could spread to currency markets if pressure forces more and more liquidations.
Ether, the second-largest cryptocurrency by market cap, held steady near $2,000 on Friday and fell to $1,700 on Thursday. Bitcoin and Ether are down about 60 pc from their record peaks in November.
Crypto-related stocks have also countered bullishly, with shares in broker Coinbase holding steady overnight but still down by half in a little over a week.
In Asia, Hong Kong-listed Huobi Technology and BC Technology Group, which operate trading platforms and other crypto services, saw losses of more than 17 pc weekly.
Amid the turmoil, Nomura said on Friday that it has begun offering bitcoin derivatives to customers, the latest move by a traditional financial institution into the asset class.
