Science

Bitcoin is trying to recover its positions after a record fall

SAINGAPORE/HONG KONG (Reuters) – Bitcoin bounced back slightly on Friday after falling to its lowest level in 16 months the day before, as its status as a cryptocurrency star didn’t stop it from being hit by the TerraUSD crash and a general movement of distrust in financial assets seen as the most risky.

Once seen as a hedge against inflation, all crypto assets have been hit for weeks by the dollar’s rise, helped by rising US interest rates. But in recent days, this movement has suddenly increased, raising fears of a spread to other markets.

Bitcoin, the top cryptocurrency by total market value, added 4.57% to $30,217.32 at 0830 GMT from $25,401 in the session the day before, its lowest level since December 2020.

But even taking this incipient bounce into account, it shows a drop of more than 35% from its late March peak of over $48,000, and nearly 25% in nine sessions. And it’s heading for its seventh consecutive negative weekly record, unprecedented since its inception.

“I don’t think the worst is over,” warns Scotty Siu, chief investment officer of Axion Global Asset Management, a Hong Kong company that runs a fund specializing in cryptocurrencies.

“I think there’s still downside potential in the next few days. I think a much steeper collapse in open positions is required for speculators to really get out of the game and the market to finally stabilize.”

TERRAUSD FALL SHOCKED THE ENTIRE MARKET

The entire “crypto” market has been rocked in recent days by the fall of TerraUSD, a “stablecoin”, a digital token (token) whose value is linked to that of a “classic” asset, in the case of the US dollar, and therefore sudden and often sharp fluctuations in other crypto assets are supposed to be avoided.

However, Terra USD (USDT) broke parity with the US dollar this week, a complex mechanism that was supposed to ensure its stability, based on another digital token, which could not withstand selling pressure exceptionally strongly. On Friday, it cost only about 10 cents.

Tether, the most important stablecoin that claims to be backed directly by dollar assets, is also under pressure, dropping to 95 cents on Thursday before bouncing back to the dollar on Friday, according to CoinMarket Cap data.

The total aggregate capitalization of all cryptocurrencies is now only half of its November level, the decline has been transformed in recent days into an almost panicky movement with doubts about the “stablecoins” commonly used to make transfers between crypto assets or convert into currencies.

THE MARKET NEEDS TRUST IN ISSUERS

“More than half of all bitcoin and ether traded are primarily traded against the stablecoin, USDT and Tether,” analysts at Morgan Stanley explained in a note.

“For this type of stablecoin, the market needs to be confident that the issuer has enough liquid assets to be able to sell during times of market stress.”

The company that manages Tether said it has the necessary assets in the form of US Treasury bonds, cash, corporate bonds and cash products.

But Tether is likely to be tested again if traders start selling again, and some analysts fear this move will take over the money markets.

Ethereum, the second largest cryptocurrency by capitalization, traded just above $2,000 on Friday after falling to $1,700 the day before, almost 60% below its November peak.

This decline was logically reflected in listed companies specializing in crypto assets, such as Coinbase, the main trading platform of the sector, whose market value fell by 55% in six sessions.

(Report by Tom Westbrook and Alan John, French version by Marc Angrand, edited by Jean-Michel Belo)

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