Crypto CRASH: Bitcoin heading for record losing streak after ‘stablecoin’ collapses

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Cryptocurrency assets have been hoovered up in a selling frenzy of risky investments on fears over surging inflation and rising interest rates. Confidence in the market is becoming increasingly fragile, as tokens meant to be closely tied to the US dollar have struggled. Bitcoin bounced back in the Asia session to trade at around $30,500 just before midday – a rare positive sign for the crypto leader as it had plummeted to a 16-month low on Thursday to just $25,400.

But this is nowhere near close to levels a week ago of around $40,000 and, unless there is a huge rebound, it’s heading for a record seventh consecutive weekly loss.

That’s also a huge fall from the record high of $67,000 reached last November when the crypto market enjoyed several weeks of market buoyancy.

Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund, warned: “I don’t think the worst is over. I think there is more downside in the coming days.

“I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilise.”

The global value of cryptocurrencies has plunged by half since November, but there is now also surging panic among investors over the recent squeeze on stablecoins.

These are tokens pegged to the value of traditional assets, such as the USD dollar, and are the medium for moving money between cryptocurrencies.

Usually, owners of Terra should be able to trade their coins for one dollar’s worth of Luna, ensuring the former’s price is stable.

But a plunge in confidence in the system maintaining this has led to a dramatic sell-off in Terra, consequently sinking Luna’s price.

READ MORE: Bitcoin price latest: Major slump sees Bitcoin drop to new low

“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”

But on a broader scale, financial markets have so far seen minimal from the cryptocurrency crash.

UBS head of strategy James Malcolm said: “Crypto is still tiny and crypto integration within broader financial markets is still infinitesimally small.

“This idea that what goes on in crypto stays in crypto – that’s in many ways where we still are at the moment.”

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