Bitcoin dipped further below $30,000 as investors 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 extended losses amid fears of rising inflation and collapsing global prices. a controversial stablecoin project.
Bitcoin price fell to $26,595.52 on Thursday morning, according to data from Bitstamp. This is the first time bitcoin has fallen below the $27,000 level since December 30, 2020.
As of 1:30 a.m. ET, bitcoin was trading at $27,061, down 15% in the past 24 hours.
Ether, the second largest digital currency, fell to $1,789 per coin. This is the first time the token has fallen below $2,000 since July 2021.
Ether was last down 23% at a price of $1,852.
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 near 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 mirror the value of the dollar, but it fell below 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 to exit in droves.
On Thursday morning, the UST was trading at around 62 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, erased 97% of its value in 24 hours and was last worth just 30 cents – even less than UST.
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 decline in the value of tether, the world’s largest stablecoin, added to investor fears on Thursday. The token at one point slipped below 99 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.