Bitcoin fell below $26,000 for the first time in 16 months amid a broader cryptocurrency selloff that wiped more than $200 billion from the broader market in a single day.
The price of bitcoin fell to $25,401.29 on Thursday morning, according to Coin Metrics. This is the first time the cryptocurrency has fallen below the $27,000 level since December 26, 2020.
Bitcoin has since pared its losses and was last trading at $29,413.08, down 0.1%.
Ether, the second largest digital currency, fell to $1,704.05 per coin. This is the first time the token has fallen below $2,000 since June 2021. Ether was last down 6.5% at a price of $1,988.45.
Investors are fleeing cryptocurrencies at a time when stock markets have plunged from coronavirus pandemic highs over fears of a price spike and deteriorating economic outlook. U.S. inflation data released on Wednesday showed prices for goods and services jumped 8.3% in April, higher than analysts expected and close to the highest level in 40 years.
The downfall of embattled stablecoin protocol Terra is also weighing on traders’ minds. TerraUSD, or UST, is meant to reflect the value of the dollar. But it fell to less than 30 cents on Wednesday, shaking investor confidence in the so-called decentralized finance space.
Stablecoins are like the bank accounts of the barely regulated crypto world. Digital currency investors often turn to them for safety during volatile markets. But UST, an “algorithmic” stablecoin that relies on code rather than cash held in a reserve, has struggled to maintain stable value as holders rushed for mass exits.
On Thursday, the UST was trading at around 33 cents, still well below its expected $1 anchor. Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, wiped out 99% of its value and was worth just 1 cent.
Investors fear the implications for bitcoin. Luna Foundation Guard – a fund created by the creator of Terra Do Kwon – had amassed a multi-billion dollar stack of bitcoins to help support the UST in times of crisis. The fear is that Luna Foundation Guard will sell off much of its bitcoin holdings to shore up its struggling stablecoin. It’s a risky bet, not least because bitcoin itself is an incredibly volatile asset.
The fallout from Terra’s collapse raised fears of market contagion. Tether, the world’s largest stablecoin, also fell below its $1 peg on Thursday, at one point falling to 95 cents. Economists have long feared that Tether does not have the required amount of reserves to strengthen its peg to the dollar in the event of large withdrawals.
Bitcoin (BTC) Price Drops Below $26,000 As Crypto Selling Intensifies
Source link Bitcoin (BTC) Price Drops Below $26,000 As Crypto Selling Intensifies