Bitcoin is set for record loss after the collapse of ‘Staplecoin’

  • Bitcoin margins rose again from a 16-month low
  • The collapse of TerraUSD shook the crypto market
  • Analysts say the impact is less in traditional markets

SINGAPORE / HONG KON / LONDON, May 13 (Reuters) – Cryptocurrencies suffered heavy losses on Friday, with Bitcoin hovering over $ 30,000, but cryptocurrencies continued to crash into cryptocurrencies after the collapse of the so-called staplecoin Terroyust. .

Crypto assets have also been wiped out in the widespread sale of risky investments due to concerns about high inflation and rising interest rates. The sentiment is particularly weak as the tokens to be paired with the dollar have stumbled.

Bitcoin, the largest cryptocurrency by market value, was able to bounce in the Asian session and traded around $ 30,500 at 1140 GMT. It is set to recover from a 16-month low of about $ 25,400 reached on Thursday.

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But this is far below the $ 40,000 level it was a week ago, and if there is no resurgence in weekend trading, it will go to its seventh consecutive weekly loss.

“I do not think the worst is over,” said Scottie Xiu, investment director at Action Global Asset Management, a Hong Kong – based company that runs cryptocurrency funds.

“I think there will be many more downsides in the coming days. I think we should see a decline in open interest rates, so I think speculators are really getting out of it, and only then will the market sustain.”

Beyond Bitcoin

Crypto-related stocks, along with shares on broker Coinbase, are volatile (COIN.O) Stable overnight but still halved in a week.

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Hobby technology listed in Hong Kong, Asia (1611.HK) And BC Technical Committee (0863.HK)Operating trading platforms and other crypto services saw a weekly drop of more than 20%.

But broader financial markets have so far seen little knock-on effect from the cryptocurrency crash.

“Crypto is still small and crypto integration within broad financial markets is still innumerable,” said James Malcolm, head of FX strategy at UBS.

“What happens in crypto is this notion that crypto is – in many ways we still are.”

Representations of ripple, bitcoin, ether and litcoin virtual currencies can be seen in this chart on the PC motherboard, February 14, 2018. REUTERS / Dado Ruvic / Illustration

STABLECOIN SQUEEZE

Sales have halved the global market value of cryptocurrencies since November, but pressing staplecoins in recent sessions has caused the currency to panic.

Staplecoins are the main medium for transferring money or converting reserves into fiat currency between tokens and cryptocurrencies that value traditional assets, often denominated in US dollars. read more

Cryptocurrency markets were shaken by the fall of the TerraUST (USD) this week, which broke its 1: 1 pound against the dollar.

The currency’s complex stabilization mechanism, which included balancing with a free-floating cryptocurrency called the Luna, stopped working when the Luna came under selling pressure. TerraUSD last traded at 9 cents, while Luna fell near zero. read more

Tether, the largest Staplecoin and its developers claim to be supported by dollar assets, which also came under pressure and fell to 95 against the dollar on Thursday, according to CoinMarketCap data, but returned to $ 1 on Friday. read more

“More than half of all bitcoin and ether traded on exchanges are against staplecoin, with USDT or Tether playing the largest share,” Morgan Stanley analysts said in a research note.

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“For these types of staple coins, the market needs to trust that the supplier has enough liquid assets that they can sell under market pressure.”

Tether’s operating company claims to have the necessary assets in treasuries, cash, corporate securities and other money market products.

But analysts are concerned that if traders continue to sell, Tether will face more trials and stress could spread to the money markets if the pressure is further eased.

The rating agency Fitch said in a note on Thursday that cryptocurrencies and digital finance could have “significant negative effects” if investors lose faith in staplecoins.

“Many regulated financial institutions have increased their exposure to cryptocurrencies, DFI and other digital finance in recent months, and if the crypto market volatility is severe, some Fitch-rated providers may be affected,” it said.

However, Fitch said weak links between crypto markets and regulated financial markets would limit the potential for crypto market volatility to cause widespread financial instability.

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Tom Westbrook and Alun John report; Editing by Bradley Beret and Emilia Sithol-Modris

Our standards: Thomson Reuters Trust Principles.

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