Bitcoin fell further below the $30,000 level as investors fled the cryptocurrency.
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Bitcoin It fell below $27,000 on Thursday for the first time in more than 16 months, as cryptocurrency markets extended losses amid fears of rising inflation and the collapse of a controversial stablecoin project.
Bitcoin fell to $26,595.52 Thursday morning, according to Bitstamp data. This is the first time that Bitcoin has dropped below $27,000 since December 30, 2020.
As of 1:30 AM ET, bitcoin was trading at $27,061, down 15% in the past 24 hours.
ether, the second largest cryptocurrency, fell to $1,789 per coin. It is the first time the coin has dropped below $2,000 since July 2021.
Ether was last down 23% at $1,852.
Investors are fleeing cryptocurrencies at a time when stock markets are retreating from the highs of the coronavirus pandemic amid fears of higher prices and a deteriorating economic outlook. US inflation data released on Wednesday showed that prices of goods and services jumped 8.3% in April, higher than expected by analysts and close to a 40-year high.
Also on the minds of traders is the collapse of the embattled Terra stable protocol.
TerraUSDor UST, is supposed to reflect the value of the dollar, but it fell below 30 cents on Wednesday, denting investor confidence in the so-called decentralized finance space.
Stable currencies like bank accounts for the hardly regulated crypto world. Cryptocurrency investors often turn to them for safety in times of volatility in the markets.
But UST, an “algorithmic” stablecoin backed by a token rather than cash held in reserve, has struggled to maintain a steady value as its holders pulled out in order to exit en masse.
As of Thursday morning, the floor cabinet was trading at about 62 cents, still well below its dollar peg.
Lunaanother Terra token with a floating price and intended to absorb the price shocks of terrestrial tanks, wiped out 97% of its value in 24 hours and was last valued at just 30 cents – even less than terrestrial tanks.
Investors fear the implications for bitcoin. The Luna Foundation Guard – a fund set up by Terra creator Do Kwon – has amassed a pile of billions of dollars in bitcoin to help support underground treasuries in times of crisis.
The fear is that the Luna Foundation Guard will sell a large portion of its bitcoin holdings to support its stablecoin. This is a risky gamble, not least because bitcoin is itself an incredibly volatile asset.
Adding to investor concerns, there was a drop in the value of tether, the world’s largest stablecoin, on Thursday. At one point, the token fell below 99 cents. Economists have long feared that rope might not have the required amount of reserves to bolster its dollar peg in the event of mass withdrawals.
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