Bitcoin eyes register losing streak as ‘stablecoin’ collapse crushes crypto

Bitcoin eyes register losing streak as ‘stablecoin’ collapse crushes crypto

Representations of the virtual currencies Ripple, Bitcoin, Etherum and Litecoin are seen on a PC motherboard in this illustrative image dated February 14, 2018. REUTERS/Dado Ruvic/Illustration

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SINGAPORE, May 13 (Reuters) – Cryptocurrencies posted huge losses on Friday, with Bitcoin pinning below $30,000 and heading for a record losing streak as the collapse of TerraUSD, a so-called stablecoin, ripped through markets.

Crypto assets have also been swept up by the widespread selling of risky assets on worries of high inflation and rising interest rates. However, sentiment is particularly fragile as tokens that should be pegged to the dollar have stalled.

Bitcoin, the largest cryptocurrency by total market value, attempted a rebound early in the Asian session, rising 2% to $29,500, a sort of recovery from a 16-month low of around $25,400 set on Thursday.

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It remains well below the around $40,000 level from a week ago and is heading for a seventh straight weekly loss unless there is a rebound in weekend trading.

“I don’t think the worst is over,” said Scottie Siu, investment director at Axion Global Asset Management, a Hong Kong-based company that operates a crypto index fund.

“I think there will be more downside in the coming days. I think what we need to see is that open interest collapses a lot more, so speculators are really out, and then I think the market will stabilize.”

TerraUSD (USDT) broke its 1:1 peg to the dollar this week as its mechanism to remain stable with another digital token broke down amid selling pressure. It was last traded below 10 cents. Continue reading

Tether, the largest stablecoin and one whose developers say it’s backed by dollar assets, has also come under pressure, falling to 95 cents on Thursday, according to CoinMarketCap data. Continue reading

UNSTABLE

The sell-off has roughly halved the global cryptocurrency market value since November, but the decline has turned to panic in recent sessions with pressure on stablecoins.

These are tokens pegged to the value of traditional assets, often the US dollar, and are the primary medium for moving money between cryptocurrencies or converting balances into fiat cash.

“Over half of all bitcoin and ether traded on exchanges are compared to stablecoins, with USDT or Tether taking the largest share,” analysts at Morgan Stanley said in a research note.

“For these types of stablecoins, the market must have confidence that the issuer has sufficient cash to sell during times of market stress.”

Tether has rallied back to parity against the dollar and its operating company says it has the necessary assets in the form of government bonds, cash, corporate bonds and other money market products.

But it’s likely to face further testing as dealers continue selling, and analysts fear stress could spill over into money markets as pressures force more liquidations.

Ether, the second largest cryptocurrency by market cap, stabilized near $2,000 on Friday after falling as low as $1,700 on Thursday. Bitcoin and Ether are about 60% down from record highs set in November.

Crypto-related stocks have also taken a hit, with shares in broker Coinbase (COIN.O) stabilizing overnight but still down by half in just over a week.

In Asia, Hong Kong-listed Huobi Technology (1611.HK) and BC Technology Group (0863.HK), which operate trading platforms and other crypto services, posted weekly declines of more than 15%.

Amid the turmoil, Nomura (8604.T) said Friday it had begun offering Bitcoin derivatives to clients, the latest move into the asset class by a traditional financial institution.

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Reporting by Tom Westbrook and Alun John.

Our standards: The Thomson Reuters Trust Principles.

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