(Kitco News) The cryptocurrency market is in a panic as digital assets have lost $800 billion in market value over the past month, according to CoinMarketCap data. The shift in sentiment comes as investors reassess risky assets ahead of tighter monetary policy around the world.
In the latest round of volatility, bitcoin fell to $29,330, touching its lowest level in ten months. Other crypto assets also declined. The world’s second largest cryptocurrency Ethereum touched a daily low of $2,165, which is also a ten-month low. Solana was briefly trading below $50, and Cardano touched $0.54.
However, the most volatile digital asset continued on Wednesday in the algorithm stablecoin TerraUSD (UST). The stablecoin crashed to around 30 cents earlier in the session after breaking the intended 1-to-1 peg to the US dollar earlier this week.
In a Twitter thread, Do Kwon, co-founder of Terraform Labs, the company behind the token, said it has a “recovery plan” that includes raising external funding to “rebuild” TerraUSD and make it secured — backed by reserves to maintain a 1-to-1 peg. in dollars.
“When we start rebuilding the ground tanks, we will modify its mechanism to be foolproof,” Du Kwon said.
1/ Dear Terra Community:
– Is Kwon?? (stablekwon) May 11 2022
Floor volatile volatility is affecting the broader crypto market. Marcus Sotirio, an analyst at GlobalBlock, said there are concerns that the Luna Foundation Guard – a non-profit organization that supports the Terra blockchain ecosystem – will be forced to sell large amounts of Bitcoin it holds as reserves.
“There is now a fundamental risk to the crypto industry as the UST stablecoin breaks away from $1,” Sotiriou said on Wednesday. “This led to a massive panic as investors feared that the Luna Foundation Guard would sell off their reserves, including 80,000 Bitcoin.”
Data from Glassnode revealed that 80,000 bitcoins were removed from exchanges, proving that the Luna Foundation Guard was selling its bitcoins “to raise funds to pay the price of terrestrial treasuries back up,” Soterio added.
“Soon, we will discover which DeFi projects have their vaults placed in their vaults or floor vaults, leading to the implementation of notable protocols,” he said.
risk to bitcoin
Bitcoin has seen massive fluctuations lately, losing more than 50% since its November highs.
The question that worries many investors now is how risky Bitcoin is below the $30,000 level, which it broke briefly again on Wednesday.
“Bitcoin saw the rug pulled back $30,000 after a hot inflation report sent the NASDAQ index and all risky assets tumbling. It is a very nervous time in the cryptocurrency markets after the controversial collapse of the UST stablecoin and as the majority of institutional investors in the crypto space invested in the year They are losing money now,” said Edward Moya, chief market analyst at OANDA. “Bitcoin is back above $31,000 and will likely continue to take a signal from the Nasdaq.”
According to Moya, the level to watch is $28,500. If that fails, Bitcoin will be subject to further selling pressure.
He added, “A lot of institutional money will have tight restrictions with their bitcoin trades, and most likely won’t tolerate a movement below the $30,000 level.” “Bitcoin faces short-term resistance at $32,500, followed by the $35,000 area. On the downside, Bitcoin will try to hold at $30,000, with $28,500 providing a significant support.”
Some analysts see bitcoin becoming less risky as markets begin pricing at the end of the Fed’s rate hike cycle.
“Bitcoin is in the process of transitioning from risky to risk-free assets. I think $30,000 would be a very good support level. But if the stock market drops again, high-speed Bitcoin will suffer,” said Mike McGlone, chief commodity strategist at Bloomberg Intelligence. For Kitco News.
However, in the long run, Bitcoin will come out, McGlone noted. He said, “Once I see Bitcoin showing a good bottom, eventually it will build a good base (maybe around $30,000) and then head towards $100,000. The time frame is hard to predict.”
There has also been some pressure on the coding space from a regulatory perspective. US Treasury Secretary Janet Yellen commented on the UST stablecoin losing its peg to the dollar.
“I think this simply shows that this is a fast-growing product, that there are risks to financial stability, and we need an appropriate framework,” Yellen testified on Tuesday.
Yellen noted that legislation dealing with cryptocurrency regulation would be “appropriate” this year. “There we see operational risks that could threaten financial stability — risks associated with the payment system and its integrity and risks associated with increased concentration if stablecoins are issued by companies that already have significant market power,” Yellen said. “We definitely see big risks here.”
The U.S. Securities and Exchange Commission also warned on Wednesday that cryptocurrency swaps would be among the reported security-based swaps. “Without prejudging any one token… If the swap is based on a crypto-asset that is security, then that’s a security-based trade-off. Thus, our rules apply to it,” Gensler said.
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