Cryptocurrencies are being sold rapidly, leading to significant declines in their total value from the previous day.
Bitcoin prices dipped below $26,000 on Thursday morning.
The sell-off of the crypto market became intense today
The Standard Ethereum Token fell to $1,704.05, which it had not been below since June 2021. It also dropped 6.5% at a price of $1,988.45 at the time of writing.
Investors are fleeing from cryptocurrencies, even as stock markets have plunged over fears of high prices and a deteriorating economic outlook. This is especially true for the United States, where inflation data shows that prices for goods and services are soaring with 8.3% in April, which is much higher than estimates, and close to the highest level in 40 years.
“TerraUSD, or UST, is supposed to mirror the value of the dollar,” but its price tanked, shaking investors’ confidence.
Safety of digital currency can be achieved with a stablecoin. A UST, or algorithmic stablecoin, typically based on code and not actually holding cash in reserve, has trouble maintaining its stability because holders are exiting the markets immediately.
Luna dropped to 1 cent, trading well below its $1 peg and erasing 99% of its value. UST is worth 33 cents at the time of writing.
Investors are afraid that a new Korean cryptocurrency will change the price of bitcoin. The Luna Foundation Guard, who holds a large stake in BTC according to their website, are causing the problem by selling off their bitcoin supply to shore up the UST market. Bitcoin is already volatile enough so this could cause problems.
The collapse of terra has led to fear of market contagion. Tether, the world’s biggest stablecoin, also dropped below its $1 peg Thursday. Economists long feared that the reserves may not have been enough in the event of mass withdrawals.
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