On May 9, Bitcoin plunged to its lowest level since January as crumbling equity markets continued to hurt cryptos that are now trading in line with the riskier assets like the tech stocks.
Bitcoin plunged to as low as $32,800 during the day, breaching the January low of $32,951. The biggest crypto dropped further to levels that were last seen in July last year. Since then, it seems to have steadied but struggling to rise back above $33,000.
Matt Dibb, COO of Singapore-based cryptocurrency platform Stack Funds, stated:
“I think everything within crypto is still classed as a risk asset, and similar to what we’ve seen with the Nasdaq, most cryptocurrencies are getting pummelled.”
The tech-heavy NASDAQ (.IXIC) lost 1.5% in the past week and has so far lost 22% year to date, mainly hurt by the prospect of severe inflation compelling the United States Federal Reserve to hike rates despite the slowing economic growth. NASDAQ futures were down another 0.8% in Asia trade on May 9.
Dibb stated that other factors in the decline over the weekend – bitcoin (BTC) closed on Friday at around $36,000 – were the cryptocurrency market’s low liquidity over the weekends, coupled with the short-lived fears that the algorithmic stablecoin known as Terra USD (UST) might lose its peg to the dollar.
By description, stablecoins are digital tokens pegged to other traditional assets, mostly the United States dollar. UST is keenly watched by the crypto sector and community due to the novel way it manages to maintain its 1:1 dollar peg.
Since its founders have set out their plans to create a reserve of $10 billion worth of bitcoins to back this stablecoin. It means that volatility in UST might spill over into the bitcoin markets. Ether, the second-biggest crypto that underpins the Ethereum network, dropped to lows of $2,374 on April 9, its lowest since early February.