Bitcoin falls to lowest in 16 months; sheds 2021 gains
Bitcoin has lost two-thirds of its market value since its ATH in November, with its value now falling to a 16-month low since December 2020
By Shashank Bhardwaj
The cryptocurrency market continued to witness a downtrend triggered by the TerraUSD meltdown this week, leading to Bitcoin dropping to a 16-month low. Ether, the second-largest cryptocurrency by market cap, has also lost more than half of its value so far this year. The latter was trading at $1,700, down by nearly 15 percent on Thursday–the lowest since June 2021.
Bitcoin prices dropped to $25,401, the lowest level since December 28, 2020. It has lost a third of its value or roughly $13,000 in the past eight sessions. It is down by more than 45 percent this year. Also, from its all-time high of $69,000 in November 2021, Bitcoin has shed two-thirds of its value already. Bitcoin is lately showing correlation to stocks; NASDAQ has already declined by 6.4 percent this week.
TerraUSD, which is pegged to the dollar in a 1:1 ratio, slipped below the 1:1 peg this week, adding to the tumble of the already under pressure cryptocurrency markets. TerraUSD slipped to 50 cents on Thursday, according to CoinGecko.
TerraUSD is a stablecoin–a digital token pegged to the US Dollar. TerraUSD, unlike most stablecoins, which are pegged by reserves, is a decentralised stablecoin. The stablecoin is supposed to maintain its peg via a complex mechanism in which the stablecoin is swapped with another free-floating token. Besides TerraUSD, stablecoins backed by reserves were showing stress signs on Thursday too.
Richard Osher, Head of OTC trading, BCB Group, said that the downtrend resembles the bank runs during the 2008 financial crisis. He said, “The collapse of the Peg in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins.” Ipek Ozkardesskaya, a senior analyst at Swissquote Bank, said, “The Terra incident is causing an industry-based panic, as Terra is the world's third-biggest stable coin." He added that TerraUSD "couldn't hold its promise to maintain a stable value in terms of U.S. dollars."
Another major stablecoin, Tether, also slipped below its 1:1 dollar peg to 98 cents on Thursday. USD coin and Binance USD were trading at $1.04 and $1.07, significantly breaking out from their usual range.
Shashank is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash