Title: Bitcoin set for record losing streak as 'stablecoin' collapse crushes crypto
May 13, 2022 05:06AM ET
Cryptocurrencies suffered big losses on Friday. The price of Bitcoin traded near $30,000 and was on the verge of a record loss as the collapse of TerraUSD, a so-called stablecoin, rocked the markets.
Crypto assets were also hit by a broad sell-off in risky assets on concerns about high inflation and rising interest rates. Sentiment has been particularly fragile as tokens that were supposed to be pegged to the dollar have faltered.
Bitcoin, the largest cryptocurrency by market value, rallied in Asian trading to trade at $30,300 at 0623 GMT, up 5%. It has recovered somewhat from a 16-month low of around $25,400, reached on Thursday.
However, it remains well below the previous week's level of around $40,000 and is heading for a record loss for the seventh straight week unless there is a recovery in weekend trading.
This week, TerraUSD broke its 1:1 peg to the dollar as its mechanism for stabilization by another digital token failed under selling pressure. It last traded at around 10 cents.
According to CoinMarketCap, Tether, the largest stablecoin that its creators say is backed by dollar assets, also came under pressure, falling to 95 cents on Thursday but trading back at a dollar on Friday.
Tether's operating company says it has the necessary assets in government bonds, cash, corporate bonds, and other money market products.
But Tether is likely to face further tests as traders continue to sell, and analysts are concerned that stress could spill over into money markets as the pressure forces more and more liquidations.
Ether, the second-largest cryptocurrency by market capitalization, stabilized near $2,000 on Friday after falling as low as $1,700 on Thursday. Bitcoin and ether are down about 60% from the highs reached in November.