As a serious “ripple” warning goes into effect, bitcoin and cryptocurrencies have dropped to levels not seen since the crypto market began booming in late 2020, wiping off about $1 trillion in value in a month.
The sell-off comes after the $18 billion algorithmic stable coin terraUSD (UST) lost its peg to the U.S. dollar, wiping out the price of its support coin luna which has now lost almost 99% of its value—and risks dragging the bitcoin and crypto market even lower.
Panic spread from a meltdown this week in stable coin TerraUSD, known as “UST” when it slipped below its 1:1 peg to the dollar.TerraUSD, which recently climbed into the top 10 tokens by market value, was quoted at around 50 cents Thursday, according to CoinGecko price data. Stablecoins are digital tokens pegged to the value of traditional assets, like the U.S. dollar, and are favored in crypto markets in times of turmoil.
The bitcoin price has dropped to around $27,000 per bitcoin, down 12% in the last 24 hours, and dragging down the wider crypto market with other top ten coins Ethereum, BNB BNB+22.1%, XRP XRP+16%, Solana, Cardano, and avalanche recording even steeper loses. Ethereum has crashed 22% since this time yesterday, with BNB, XRP, Solana, Cardano, and avalanche all losing between 25% and 33%.
Tether, a major stablecoin, slipped below its dollar peg, hitting as low as 98 cents early Thursday, according to CoinGecko. USD Coin was trading at around US$1.04 while Binance USD was at US$1.07 – a significant breakout of its usual range said Reuters.
Most stablecoins are backed by reserves, but TerraUSD is an algorithmic, or “decentralized,” stablecoin, which is supposed to maintain its peg via a complex mechanism that involves swapping it with another free-floating token, says Reuters.
But even reserve-backed stablecoins, which say they have sufficient assets to maintain their pegs, were showing signs of stress on Thursday.
