The cryptocurrency suffered major losses on Friday, with bitcoin pinned below $30,000 and set for a record losing streak as the collapse of TeraUSD, a so-called stablecoin, ripple through the markets.
Crypto assets have also been swamped in widespread selling of risky investments over concerns of high inflation and rising interest rates. However, sentiment is particularly fragile, as the coin pegged against the dollar has faltered.
Bitcoin, the largest cryptocurrency by total market cap, attempted a rally at the start of the Asia session and rose 2% to $29,500, marking some recovery from a 16-month low of around $25,400 on Thursday.
It is well below the week ago level of around $40,000 and is headed for the seventh consecutive weekly loss unless there is a bounce back 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 a crypto index fund.
“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 below 10 cents last time.
Tether, the largest stablecoin and whose developers say is backed by dollar-denominated assets, has also come under pressure, falling as much as 95 cents on Thursday, according to data from CoinMarketCap.
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 is pegged to the dollar and its operating company says it has essential assets in Treasuries, cash, corporate bonds and other money-market products.
But it could face further tests if traders continue to sell, and analysts worry that tensions could spread to currency markets if the pressure forces more and more liquidations.
Ether, the second-largest cryptocurrency by market cap, held steady near $2,000 on Friday, following a drop of $1,700 on Thursday. Bitcoin and Ether are down nearly 60% from November’s all-time highs.
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 weekly losses of more than 15%.
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.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)