Bitcoin has fallen below $ 30,000 as investors have fled cryptocurrencies.
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Bitcoin fell below $ 27,000 on Thursday for the first time in more than 16 months as cryptocurrency markets increased losses amid fears of rising inflation and the collapse of a controversial stable coin project.
The price of bitcoin fell to $ 26,595.52 on Thursday morning, according to Bitstamp. This is the first time that bitcoin has sunk below the $ 27,000 level since December 30, 2020.
At 1:30 a.m. ET, Bitcoin was trading at $ 27,061, down 15 percent in the last 24 hours.
Ether, the second-largest digital currency, fell to $ 1,789 a coin. This is the first time the token has fallen below the $ 2,000 mark since July 2021.
The ether last fell 23% at $ 1,852.
Investors are fleeing cryptocurrencies at a time when stock markets have fallen from the peaks of the coronavirus pandemic due to fears of rising prices and deteriorating economic prospects. US inflation data released on Wednesday showed prices for goods and services jumped 8.3% in April, higher than analysts expected and close to a 40-year high.
It also weighs on the minds of traders and the fall of the struggling Terra stablecoin protocol.
TerraUSD, or UST, was supposed to reflect the value of the dollar, but fell to less than 30 cents on Wednesday, shaking investor confidence in the so-called decentralized financial space.
Stablecoins are like the bank accounts of a barely regulated crypto world. Investors in digital currency often turn to them for security in times of market instability.
But the UST, an “algorithmic” stable coin that is backed by code rather than money held in reserve, is struggling to maintain a stable value as holders have been trying en masse to get out.
As of Thursday morning, the UST was trading at about 62 cents, still well below the projected fixed price of $ 1.
Luna, another floating-price Terra token designed to absorb UST price shocks, erased 97% of its value in 24 hours and last cost only 30 cents – even less than UST.
Investors fear the consequences for bitcoin. The Luna Foundation Guard, a fund set up by Terra founder Do Kuon, had amassed billions of dollars in bitcoins to help support the UST during the crisis.
The fear is that Luna Foundation Guard will sell a large part of its bitcoins to support its sick stablecoin. This is risky gambling, not least because bitcoin itself is an incredibly variable asset.
Adding to investors’ fears on Thursday was a decline in the value of tether, the world’s largest stable coin. The token fell below 99 cents at one point. Economists have long feared that tether may not have the necessary reserves to strengthen its commitment to the dollar in the event of a mass withdrawal.
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