The sell-off in cryptocurrencies continued on Thursday, with Bitcoin dropping to its historic lows in more than a year as a panic out of so-called stablecoins sent tremors throughout the market.
A breakdown this week in TerraUSD, another of the world’s largest cryptocurrencies, dealt the latest shock to Bitcoin and its rival Ethereum, which has lost more than half its valuation so far this year.
This week, TerraUSD fell below its 1:1 peg to the dollar, upsetting cryptocurrency markets that were already under pressure from falling stock markets. Around 50 cents was quoted for TerraUSD.
Stablecoins are digital tokens that are linked to traditional assets like the US dollar. They’re popular during periods of market upheaval, and traders use them to shift money around and experiment with other cryptocurrencies.
Although cryptocurrencies have generally remained unaffected, the recent selling pressure on these assets has cast doubt on the broader notion that they are reliable stores of value in the face of market turbulence.
TerraUSD is a decentralized, algorithmic stablecoin. It was designed to keep its peg by swapping it with another unrestricted token through a complicated method.
Terra is the world’s third-largest stable coin; hence the Terra event is raising widespread concern. Reserve-backed stablecoins, which claim to have enough assets to keep their pegs, were also showing symptoms of strain.
Market participants are still examining the consequences of TerraUSD’s demise to see if large corporations or investors have suffered significant losses. That could be a sign of a larger outbreak. Ether has also dropped roughly 15%.
The collapse of Terra, a token that was meant to be tethered to the US dollar, has thrown cryptocurrency into disarray this week. The meltdown has wreaked havoc on many of the cryptocurrency’s trust procedures, with wider ramifications across the market.
Three crypto-focused ETFs started trading on the local platform Cboe Australia today, despite crypto prices being in free fall.
The three cryptos ETFs are the first to be launched in Australia, with two of them focusing on Bitcoin exposure (BTC). Ethereum is also one of them.