Bitcoin, the world’s largest cryptocurrency, has fallen more than 50% since hitting an all-time high of $69,000 in November.
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Two major tokens from the cornered crypto project Terra are currently in freefall.
The so-called stablecoin UST to hold its $1 peg plunged more than 60% from the 24 hours before Wednesday. According to CoinGecko data, it traded for just 35 cents at 4:00 AM EST.
Sister token luna has plummeted over 80% to $5.
Other cryptocurrencies fell 5% to $30,321 for Bitcoin and 4% to $2,286 for Ether.
Stablecoins are analogous to bank accounts for a cryptocurrency economy, and, at least in theory, provide a healthy store of value to avoid the kind of volatility infamous for cryptocurrencies like Bitcoin.
The world’s third largest stablecoin, UST, uses a complex system of issuing and burning tokens to adjust supply and stabilize prices. The recent sell pressure of cryptocurrencies has caused the price to plummet, further panicking the market.
The coin’s creator, Do Kwon, raised billions of dollars worth of bitcoin through his Luna Foundation Guard fund to support UST during a time of crisis. The current fear is that the Luna Foundation Guard could dump those bitcoins into the market, resulting in a bigger sell.
Bitcoin briefly fell below $30,000 on Tuesday, its lowest level since July 2021. The world’s largest digital coin is now slightly above that level. After hitting an all-time high of nearly $69,000 in November, it is down about 56%.
CryptoCompare research analyst David Moreno Darocas said the situation highlights the “vulnerability” of algorithmic stablecoins like UST.
“UST has grown into an integral and controversial part of the cryptocurrency ecosystem,” he said.
This phenomenon is still relatively new. However, UST has grown into a major player in the crypto economy with a circulating supply of nearly 17 billion tokens.
Investors are now closely watching how the Luna Foundation Guard responds to support the ailing stablecoin. Chairman Kwon said Tuesday that the announcement of a recovery plan for the UST is imminent. “Wait.” he tweeted