On Friday, bitcoin bounced, jumping over $ 30,000 despite continuing problems with TerraUSD stablecoin, which caused panic in the crypto market.
The world’s largest cryptocurrency, bitcoin, traded at about $ 30,262.85 at 4 a.m. ET on Friday, according to CoinGecko, up 8 percent in the last 24 hours after falling to levels never seen since late 2020 earlier this week.
However, the digital currency is still down 16% in the last seven days.
The recent collapse of cryptocurrencies, in which billions of dollars were wiped off the market, was largely caused by the collapse of a controversial stable coin known as TerraUSD or UST, which is believed to be linked one-to-one to the US dollar.
However, the UST lost its hold and traded at around 14 cents on Friday, according to CoinGecko.
Luna, a token closely linked to the UST, now costs $ 0 as a result.
UST and luna are connected. UST is called an algorithmic stable coin, which means that its fixation of $ 1 is supposed to be controlled by master code. This is radically different from other stable coins such as tether and USDC, which are backed by real-world assets such as bonds. UST has no real reserves.
The UST algorithm works through a complex system of digging and saving tokens to maintain price stability. The UST token is created by destroying part of the associated cryptocurrency luna to maintain the fixation of the dollar.
But the extreme volatility of the market put UST to the test and it failed to maintain its fixation.
Adding additional complications is the fact that the Terra blockchain, which is the basis of UST and luna, stopped processing transactions twice in less than 24 hours.
In addition to the UST saga, crypto markets have been hit by a number of other headwinds, including higher inflation and rising interest rates, which have led to a sell-off in global stock markets that is being filtered. Movements in cryptocurrency prices are related to stock markets.
“The Luna / UST situation has hit the market with confidence. In general, most cryptocurrencies are down [more than] 50%. Combining this with fears of global inflation and growth does not bode well for cryptocurrency, “said Vijay Ayyar, vice president of corporate development and international cryptocurrency exchange Luno.
Even a large bitcoin recovery may not be sustainable.
“In such markets, it’s normal to see rebounds of 10-30%. These are usually bear market rebounds, testing previous levels of support as resistance,” Aiyar said.
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