Bitcoin Crashes During Wild Week For Cryptocurrency

NEW YORK (AP) — It’s been a rough week in the crypto space, even for crypto standards.

Bitcoin plummeted, stablecoins were not stable at all, and one of the most prominent companies in the cryptocurrency industry lost 1/3 of its market value.

Here are some key cryptocurrency advances this week:

Bitcoin price fell to around $25,420 this week, its lowest level since December 2020, according to CoinDesk. It stabilized near $30,000 on Friday, but still less than half the price of Bitcoin in November.

Some Bitcoin proponents have said that digital currencies can protect holders from inflation and act as a hedge against a decline in the stock market. Neither has been done lately. Consumer-level inflation rose 8.3% in April compared to a year ago, the last level seen in the early 80s. Investors are dumping risky assets, including stocks and cryptocurrencies, as the Fed aggressively raises interest rates to contain inflation. The S&P 500 is down more than 15% this year. Bitcoin is down about 37% so far.

Other cryptocurrencies were equally poor. Ethereum fell 44% and Dogecoin, the preferred cryptocurrency of Tesla CEO Elon Musk, fell 53%.

Stablecoins have been considered a safe haven among cryptocurrencies. This is because the value of many stablecoins is pegged to government-backed currencies such as the US dollar or precious metals such as gold.

However, this week, Terra, one of the more widely used stablecoins, experienced a cryptocurrency like the one running on the bank.

Terra is a stablecoin in the cryptocurrency ecosystem known as Terra Luna. Terra is an algorithmic stablecoin that coordinates supply through complex buying and selling to keep the peg at $1. Terra is also fueled by an incentive program that provides owners with high returns on Terra. Luna is a coin used to buy and sell assets in the ecosystem, with a peak value of over $100.

Terra developers said the algorithm would backstop stablecoins, but they decided to backstop further with their Bitcoin holdings.

Terra’s troubles started with a combination of hundreds of millions, perhaps billions of dollars, withdrawals from Anchor, a platform that supports stablecoins. With general concerns about cryptocurrencies and the falling Bitcoin price, Terra is starting to lose its peg against the dollar. The bitcoins held by Terra were also less valuable than what they paid for, and as they sold those bitcoins to the market, the bitcoin price fell further.

Terra developers’ efforts to maintain liquidity have failed. On Friday, Terra fell to 14 cents and Luna was trading at less than 1/10th of a cent.

Coinbase has lost about a third of its value this week, during which time the cryptocurrency trading platform reported a 19% decline in active monthly users in the first quarter due to the cryptocurrency depreciation.

Investors were looking for an exit even before Coinbase reported a quarterly loss of $430 million. The stock closed at $58.50 on Thursday. Just 13 months ago, on the day of the IPO, the stock price reached $429.

In a letter to shareholders, Coinbase said the current market situation is not permanent and is focusing on the long-term, prioritizing product development. Most Wall Street analysts expect Coinbase to weather the storm, but warn that increased regulation on crypto could hamper the company’s growth.

There has been a lot of talk about cryptocurrency regulation, but little has been done about how it behaves.

Treasury Secretary Janet Yellen, who responded to volatility in the cryptocurrency market this week, said Thursday US needs a regulatory framework Protects against the risks surrounding cryptocurrencies and stablecoins.

In March, Federal Reserve Chairman Jerome Powell said that new forms of digital currency, such as cryptocurrencies and stablecoins, could pose risks to the US financial system. We need new rules To protect consumers. This Monday, just before Terra’s collapse, the Fed said in its semi-annual report on financial stability that stablecoins are vulnerable to “runs” that could harm coin owners.

Securities and Exchange Commission (SEC) Chairman Gary Gensler said that the cryptocurrency industry is “pervasive of fraud, fraud and abuse” and his agency has more powers and more powers from Congress to regulate the market. He said he needed money.

published by the UK Stablecoin Regulatory Scheme As part of a broader plan to become a global hub for digital payments, EU legislators agreed to draft rules But you still have to negotiate the final bill.

Contributed by AP Economics writer Christopher Rugaber.


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