Bitcoin struggles to hold $27,000 as Tether comes under pressure

Bitcoin price was under renewed pressure Thursday, with even bigger losses from smaller cryptocurrencies as the collapse of stablecoin UST continued to resonate in the market.

bitcoin BTCUSD,
the world’s largest cryptocurrency by market cap, fell 5% to $26,780. The crypto is down 24% so far this week and more than 50% from an all-time high set last November.

Investors were also hampered by Wednesday’s data, which showed a stronger-than-expected rise in US inflation, leading to another losing day for Wall Street stocks. US stock futures ES00,

were lower ahead of Thursday’s opening.

The recent market downturn was largely prompted by the collapse of the so-called algorithmic stablecoin TerraUSD, or UST, which aims to maintain a one-to-one peg to the US dollar. UST was last trading at around 49 cents on Binance but has fallen below 30 cents this week.

UST is powered by another crypto – Luna – via algorithms. Traders are said to be able to exchange UST for the equivalent of $1 in Luna, and when UST trades below $1, holders have an incentive to burn it and mint Luna LUNAUSD,
which has also experienced a massive slump. Luna was trading at 23 cents, down 96% over the past 24 hours.

Some blamed the crypto market’s largest stablecoin, Tether USTUSD, for a fresh push lower.
also referred to by USDT, which was trading at just 95 cents below the dollar. A Tether spokesman recently told MarketWatch that they “do not believe the UST situation means anything for the centralized stablecoin market. They are completely different types of assets.”

But Tether said early Thursday that it would conduct a $1 billion swap with a third party, adding that the total supply of Tether would remain unchanged.

Read: TerraUSD crashed. What does this mean for other stablecoins? Here are the potential winners and losers

“Tether is struggling to hold its grip. It hurts all Crypto.” tweeted Jim Bianco, President of Bianco Research. “Confidence is shot up in crypto and the risk of contagion is high. Any wobble anywhere gets them all working. Coinbase does not help! It’s down 26% today and is talking about bankruptcy. And if you do, you lose your coins.”

In Twitter comments on Wednesday, the chief executive officer of crypto exchange Coinbase Global COIN said,
insisted the company had “no risk of bankruptcy”.

However, he suggested that clients’ assets might lack some bankruptcy protection. The comments came on a day when Coinbase’s gains pointed to a slowdown in trading, and shares are down 48% this week and 78% year-to-date.

The next level of support for Bitcoin is $25,000, followed by $22,000, AvaTrade chief market analyst Naeem Aslam told investors in a note.

“It is clear that the bulls have lost the fight and the selling pressure is very high. The big question for traders is whether the current sell-off will shock Hodler,” Aslam said. Popular among crypto enthusiasts, “HODL” means “to hold on for dear life,” with investors referred to as HODLers.

Social media has been awash with alleged reports from investors who have lost huge amounts of money as a result of the UST collapse.

— Steve Goldstein contributed to this story Bitcoin struggles to hold $27,000 as Tether comes under pressure

Brian Lowry

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