The entire cryptocurrency market is over $1.2 trillion, down from over $3 trillion at its peak.
Bitcoin has lost 60% since its all-time high last November (illustration) ( GETTY IMAGES NORTH AMERICA/MARCO BELLO )
Bitcoin’s slide continued Thursday (May 12) as investors fled risky assets amid the prospect of tougher US monetary policy and stablecoin woes hurting investor confidence in the sector. .
The price of bitcoin, which sank as low as $25,424 overnight Wednesday-Thursday, recovered to $27,645 by midday, down 30% month on month and at levels not seen since December 2020.” The crypto carnage continues for another day,” said StoneX.com analyst Fawad Razaqzada.
Bitcoin is down 60% since its all-time high last November, and the entire cryptocurrency market is over $1.2 trillion, down from over $3 trillion at its peak. Between the war in Ukraine and the spread of Covid-19 in China, global activity is slowing down as inflation forces the US Federal Reserve (Fed) to raise its rates, a toxic cocktail for the markets.
This macroeconomic backdrop “sent shockwaves through the tech sector that dragged cryptos down with it, confirming that bitcoin and the like aren’t really used to fight inflation,” commented analyst Victoria Scholar. at interactive investor.
Fans of the first cryptocurrency sometimes defend the idea that bitcoin, whose issue is fixed by an algorithm and not by a central bank, is therefore a refuge against inflation, like gold.
The woes of the cryptocurrency sector were exacerbated by the difficulties of the “stablecoin” Terra (UST), which is supposed to be pegged to the dollar. But with the market shock, the cryptocurrency was trading for $0.53. Unlike other “stablecoins” which claim to ensure parity with the dollar by holding greenback reserves, the stability of the UST is supposed to be guaranteed by an algorithm which performs arbitrations and changes the money supply.
Chart showing bitcoin price since July 2010 (AFP/)
The “potential collapse” of the “stablecoin” has “trimmed crypto investors’ appetite, with cash flows turning negative,” JP Morgan analysts noted on Wednesday. And the stablecoin Tether, whose parity is supposed to be guaranteed by reserves from its issuer, saw its price briefly drop below 96 cents. The stablecoin market was worth $180 billion in March 2022, according to the Fed’s Financial Stability Report released earlier this week.
Companies linked to cryptocurrencies listed on the stock exchange were logically suffering from the shock of the sector: the exchange platform Coinbase saw its share plunge 26.4% on Wednesday, to its lowest level since its listing on the stock exchange a year earlier. MicroStrategy, a software publisher known for its boss Michael Saylor’s bet to raise funds to invest in bitcoin, lost 25.4%.
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