(LONDON) Bitcoin’s slide continued on Thursday, with investors fleeing risky assets amid the prospect of tougher US monetary policy and stablecoin woes hurting investor confidence in the market. sector.
The price of bitcoin, which sank as low as $25,424 overnight Wednesday-Thursday, rose to $27,645 around 6:20 a.m., down 30% month on month and at levels not seen since December 2020.
“The crypto carnage continues for another day,” summarizes 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 as inflation forces the US Federal Reserve (Fed) to raise rates, a toxic cocktail for the markets.
This macroeconomic backdrop “sent shockwaves through the tech sector that dragged cryptocurrencies down, confirming that bitcoin and the like aren’t really good at fighting 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 industry were exacerbated by the troubles of the stablecoin Terra (UST), which is supposedly pegged to the dollar.
But with the market shock, the cryptocurrency was trading for $0.53.
Unlike other “stablecoins” that claim to maintain parity with the dollar by holding greenback reserves, the stability of the UST is supposed to be guaranteed by an algorithm that performs arbitrages and moves the money supply.
The “potential collapse” of the stablecoin has “trimmed the appetite of cryptocurrency investors, with cash flows turning negative,” JP Morgan analysts noted 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 related to cryptocurrencies listed on the stock market were understandably 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 company known for its boss Michael Saylor’s bet to raise funds to invest in bitcoin, lost 25.4%.