SINGAPORE/HONG KONG – Cryptocurrencies suffered heavy losses Friday, May 13, with bitcoin trading near $30,000 and a streak of record losses as the collapse of TerraUSD, a so-called stablecoin, s is passed on to the markets.
Crypto assets have also been dragged into the massive sell-off of risky investments due to concerns over high inflation and rising interest rates. Sentiment is particularly fragile as tokens believed to be pegged to the dollar have faltered.
Bitcoin, the largest cryptocurrency by total market value, managed to rebound in the Asian session and traded at $30,300 (Singaporean$42,000) at 06:23 GMT (2:23 p.m.), up 5% .
It staged some kind of rally after a 16-month low of around $25,400 hit on Thursday.
But it remains well below levels a week ago of around $40,000 and, barring a rebound in weekend trade, is heading for a record seventh straight weekly loss.
“I don’t think the worst is over,” said Scottie Siu, chief investment officer of Axion Global Asset Management, a Hong Kong-based firm that manages a crypto index fund.[[nid:577821]]
“I think there are more downsides in the coming days. I think what we need to see is that open interest is collapsing a lot more, so speculators are really off, and that’s when I think the market will stabilize.”
TerraUSD (USDT) broke its 1:1 peg to the dollar this week as its mechanism to hold stable, using another digital token, failed under selling pressure. It last traded close to 10 cents.
Tether, the biggest stablecoin and the one whose developers say is backed by dollar assets, also came under pressure and fell as low as 95 cents on Thursday, according to data from CoinMarketCap, but was back down to one dollar on Friday. .
The selloff has roughly halved the global cryptocurrency market value since November, but the pullback has turned into a panic in recent sessions with pressure on stablecoins.
They are tokens pegged to the value of traditional assets, often the US dollar, and are the primary means of transferring money between cryptocurrencies or converting balances into fiat cash.
“More than half of all bitcoin and ether traded on exchanges is against a stablecoin, with USDT or Tether taking the largest share,” Morgan Stanley analysts said in a research note.
“For these types of stablecoins, the market must have confidence that the issuer holds enough liquid assets that it would be able to sell during times of market stress.”[[nid:571503]]
Tether’s operating company says it has the necessary assets in treasury bills, cash, corporate bonds and other money market products.
But Tether is likely to face further tests if traders keep selling, and analysts fear the stress could spill over into currency markets if the pressure increasingly forces a sell-off.
Ether, the second-largest cryptocurrency by market capitalization, stabilized near $2,000 on Friday after falling as low as $1,700 on Thursday. Bitcoin and Ether are around 60% below record highs reached in November.
Crypto-related stocks also suffered a hammering, with shares of broker Coinbase stabilizing overnight but still down by half in just over a week.
In Asia, Hong Kong-listed Huobi Technology and BC Technology Group, which operate crypto trading platforms and other services, were looking at weekly declines of more than 17%.
Amid the turmoil, Nomura said on Friday it had started offering bitcoin derivatives to its clients, the latest move from a traditional financial institution in the asset class.