Cryptocurrency Market Recovers After An Ugly Debacle

Cryptocurrency market recovers after an ugly debacle

On Friday, cryptocurrency suffered substantial losses as a result of the collapse of TerraUSD, a so-called stablecoin that rippled throughout markets, with bitcoin trading at $30,000 and on course for a record losing streak.

Concerns about rising inflation and interest rates have caused a broad sell-off of risky investments, including cryptocurrency. Dollar-pegged tokens have fallen out of favor, thus sentiment is particularly fragile.

Bitcoin, the most expensive cryptocurrency by market value, rose to nearly $30,000 in the Asian session.

TerraUSD (USDT) has lost its 1:1 peg to the dollar this week after its method of preserving stability, which relied on another digital token, crumbled due to panic selling. It was last traded for about ten cents.

Tether, the largest stablecoin and one backed by dollar assets, has also been crushed, plummeting to 95 cents.

Selling has accounted for over half of the global market value of cryptocurrencies since November, but the selloff has turned to panic in recent sessions as stablecoins have been pressured.

These are tokens that are linked to the value of traditional assets, most often the US dollar, and are used to move cash between cryptocurrencies or convert balances to fiat currency.

The market must trust that the stablecoin issuer has sufficient liquid assets to sell in volatile market conditions.

Tether, on the other hand, will be put to the test if traders keep selling, and analysts are concerned that the stress will spread to money markets if more liquidation is forced.

Huobi Technology and BC Technology Group, both Hong Kong-listed companies that operate trading platforms and other cryptocurrencies services, had weekly losses of more than 17 percent.

In the midst of the turmoil, Nomura announced that it has begun providing bitcoin derivatives to clients, becoming the latest conventional financial institution to enter the asset class.

On Thursday, the CEO and founder of cryptocurrency exchange FTX reported a 7.6% stake in Robinhood Markets Inc (HOOD), capitalizing on the trading app’s recent price decline.

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