Bitcoin trades near US$30,000 as markets digest TerraUSD fallout
BITCOIN staged a modest recovery to trade at around US$30,000, extending a period of relative market calm after the collapse of a closely watched stablecoin roiled digital assets in the past week.
The largest cryptocurrency advanced 3.4 per cent on Sunday (May 15) to US$30,350 as of 4 pm in New York. Ether, the second-biggest token, rose 5 per cent while coins like Avalanche and Cardano posted even larger gains.
Bitcoin dipped to a low of US$25,425 on Thursday after the TerraUSD algorithmic stablecoin unravelled, throwing the entire ecoystem that supports it into disarray. At its height, the market panic engulfed the US$76 billion stablecoin Tether, a key cog in cryptoassets that briefly dipped from its dollar peg.
“We have witnessed the rapid decline of a major project, which sent ripples across the industry, but also a new found resiliency in the market that did not exist during the last market downswing,” Changpeng Zhao, chief executive officer of crypto exchange Binance, tweeted on Sunday.
One difference between the current environment and other prolonged downturns such as the “crypto winter” in 2018 is the amount of institutions now involved in the market, which may be a source of support, said Paul Veradittakit, an partner at digital asset manager Pantera Capital.
“Compared to 2018, there are more institutional investors with exposure to crypto and most see this as a buying opportunity,” said Veradittakit.
Even after Sunday’s recovery, the total market value of cryptocurrencies has dropped by about US$350 billion in the past week to roughly US$1.38 trillion, according to data from CoinGecko. Bitcoin is almost 60 per cent off its November all-time high.
While crypto markets may have digested the worst of the TerraUSD fallout, the asset class faces other challenges - most notably, rising global interest rates and tighter liquidity conditions. Federal Reserve Chair Jerome Powell this week reaffirmed that the central bank will likely raise interest rates by a half-point at its next 2 meetings.
“I remain long term bullish, especially on Bitcoin,” said Vasja Zupan, president of cryptocurrency exchange Matrix. “But I do foresee high volatility for some time followed by a period of much lower volumes at lower prices before we can expect trending to new all-time highs.” BLOOMBERG
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