Cryptocurrency investors continue to suffer huge losses as a bad case of the jitters triggers a sell-off that has caused losses across the board.
Bitcoin, the leader of the crypto pack, is trading near 30,000 dollars ($A43,605), setting a record losing streak as the collapse of TerraUSD, a so-called “stablecoin,” rippled through the markets.
Crypto assets have also been swept up in the widespread sale of risky investments due to concerns about high inflation and rising interest rates.
The sentiment is particularly fragile as tokens that would have been pegged to the dollar have failed.
Bitcoin, the largest cryptocurrency by total market value, bounced during the Asia session, trading at $30,300 on Friday at 0623 GMT, up 5 percent. It has recovered somewhat from a 16-month low of about $25,400 hit Thursday.
Another losing week
But it remains well below a week ago level of around $40,000, and unless there is a rebound in weekend trading, it is heading for a record seventh consecutive weekly loss.
“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong-based company that manages a crypto index fund.
“I think there will be more downsides in the coming days. I think we need to see open interest collapse a lot more, so the speculators are really out, and that’s when I feel the market will stabilize.
TerraUSD (USDT) broke its 1:1 peg to the dollar this week as the mechanism to hold steady, using another digital token, failed under selling pressure. It last traded near 10 cents.
Tether, the largest stablecoin whose developers say is backed by dollar-denominated assets, has also come under pressure, falling to 95 cents on Thursday, according to CoinMarketCap data, but was back at one dollar on Friday.
Sales have roughly halved the global market value of cryptocurrencies since November, but the decline has become a panic in recent sessions due to the shortage of stablecoins.
These are tokens pegged to the value of traditional assets, often the US dollar, and are the primary medium for moving money between cryptocurrencies or converting funds into fiat money.
“More than half of all bitcoin and ether traded on exchanges is versus a stablecoin, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.
“For these stablecoins, the market needs to be confident that the issuer has enough cash to sell in times of market stress.”
Difficult road ahead?
Tether’s operating company says it has the necessary assets in treasury bills, cash, corporate bonds, and other money market products.
But Tether is likely to undergo further testing if traders continue to sell. Analysts are concerned that stress could spill over into money markets if the pressure continues to force liquidation.
Ether, the second-largest cryptocurrency by market cap, stabilized near $2,000 on Friday after falling to $1,700 on Thursday. Bitcoin and ether are about 60 percent below the record highs in November.
Crypto-related stocks have also taken a beating, with shares in brokerage Coinbase holding steady overnight but falling by half in just over a week.
In Asia, Hong Kong-listed Huobi Technology and BC Technology Group, which operate trading platforms and other crypto services, saw weekly declines of more than 17 percent.
Amid the turmoil, Nomura said Friday it has begun offering bitcoin derivatives to customers, the latest move from a traditional financial institution to the asset class.