Cryptocurrencies nurse mega losses; Bitcoin back above $30,000 | Crypto News

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Cryp­tocur­ren­cies nursed large loss­es on Fri­day, with Bit­coin back above $30,000 and but still set for a record los­ing streak after the col­lapse of Ter­raUSD, a so-called sta­ble­coin, rip­pled through cryp­tocur­ren­cy markets.

Cryp­to assets have also been swept up in broad sell­ing of risky invest­ments on wor­ries about high infla­tion and ris­ing inter­est rates. Sen­ti­ment is par­tic­u­lar­ly frag­ile as tokens sup­posed to be pegged to the dol­lar have faltered.

Bit­coin, the largest cryp­tocur­ren­cy by total mar­ket val­ue, man­aged to bounce in the Asia ses­sion and trad­ed about $30,500 at 11:40 GMT. It has staged some­thing of a recov­ery from a 16-month low of about $25,400 reached on Thursday.

But it remains far below week-ago lev­els of about $40,000 and, unless there is a rebound in week­end trade, is head­ed for a record sev­enth con­sec­u­tive week­ly loss.

“I don’t think the worst is over,” said Scot­tie Siu, invest­ment direc­tor of Axion Glob­al Asset Man­age­ment, a Hong-Kong-based firm that runs a cryp­to index fund.

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

Beyond Bitcoin

Cryp­to-relat­ed stocks have tak­en a pound­ing, with shares in bro­ker Coin­base COIN.O steady­ing overnight but still down by half in lit­tle more than 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, eyed week­ly drops of more than 20 percent.

But broad­er finan­cial mar­kets have so far seen lit­tle knock-on effect from the cryp­tocur­ren­cy crash.

“Cryp­to is still tiny and cryp­to inte­gra­tion with­in broad­er finan­cial mar­kets is still infin­i­tes­i­mal­ly small,” said James Mal­colm, head of FX strat­e­gy at UBS.

“This idea that what goes on in cryp­to stays in cryp­to – that’s in many ways where we still are at the moment.”

Stablecoin squeeze

Sell­ing has rough­ly halved the glob­al mar­ket val­ue of cryp­tocur­ren­cies since Novem­ber, but the draw­down has turned to pan­ic in recent ses­sions with the squeeze on stablecoins.

Sta­ble­coins are tokens pegged to the val­ue of tra­di­tion­al assets, often the US dol­lar, and are the main medi­um for mov­ing mon­ey between cryp­tocur­ren­cies or to con­vert bal­ances to fiat cash.

Cryp­tocur­ren­cy mar­kets were rocked this week by the col­lapse of Ter­raUSD (UST), which broke its 1:1 peg to the dollar.

The coin’s com­plex sta­bil­i­ty mech­a­nism, which involved bal­anc­ing with a free-float­ing cryp­tocur­ren­cy called Luna, stopped work­ing when Luna came under sell­ing pres­sure. Ter­raUSD last trad­ed about 9 cents, while Luna plunged close to zero.

Teth­er, the biggest sta­ble­coin and one whose devel­op­ers say is backed by dol­lar assets, has also come under pres­sure and fell to 95 cents on Thurs­day, accord­ing to Coin­Mar­ket­Cap data, but was back at $1 on Friday.

“Over half of all Bit­coin and Ether trad­ed on exchanges are ver­sus a sta­ble­coin, with USDT or Teth­er tak­ing the largest share,” ana­lysts at Mor­gan Stan­ley said in a research note.

“For these types of sta­ble­coins, the mar­ket needs to trust that the issuer holds suf­fi­cient liq­uid assets they would be able to sell in times of mar­ket stress.”

Tether’s oper­at­ing com­pa­ny says it has the nec­es­sary assets in Trea­suries, cash, cor­po­rate bonds and oth­er mon­ey-mar­ket products.

But Teth­er is like­ly to face fur­ther tests if traders keep sell­ing, and ana­lysts are con­cerned that stress could spill over into mon­ey mar­kets if pres­sure forces more and more liquidation.

Rat­ings agency Fitch said in a note on Thurs­day that there could be “sig­nif­i­cant neg­a­tive reper­cus­sions” for cryp­tocur­ren­cies and dig­i­tal finance if investors lose con­fi­dence in stablecoins.

“Many reg­u­lat­ed finan­cial enti­ties have increased their expo­sure to cryp­tocur­ren­cies, defi and oth­er forms of dig­i­tal finance in recent months, and some Fitch-rat­ed issuers could be affect­ed if cryp­to mar­ket volatil­i­ty becomes severe,” it said.

How­ev­er, Fitch said that weak links between cryp­to mar­kets and reg­u­lat­ed finan­cial mar­kets will lim­it the poten­tial of cryp­to mar­ket volatil­i­ty to cause wider finan­cial instability.

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