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

div classBodysc17zpet90 cdBBJodivpSINGAPORE Reuters – Cryptocurrencies nursed large losses on Friday, with bitcoin pinned below 30,000 and set for a record losing streak as the collapse of TerraUSD, a socalled stablecoin, rippled through markets.p

pCrypto assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. Sentiment is particularly fragile, however, as tokens supposed to be pegged to the dollar have faltered.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pBitcoin, the largest cryptocurrency by total market value, attempted a bounce early in the Asia session and rose 2 to 29,500, something of a recovery from a 16month low of around 25,400 reached on Thursday.p

pIt remains a long way below weekago levels of around 40,000 and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.p

p“I dont think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.p

p“I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and thats when I think the market will stabilize.”p

pTerraUSD USDT broke its 1:1 peg to the dollar this week, as its mechanism for remaining stable, using another digital token, failed under selling pressure. It last traded below 10 cents.p

pTether, the biggest stablecoin and one whose developers say is backed by dollar assets, has also come under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data.p

pUNSTABLEp

pSelling has roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned to panic in recent sessions with the squeeze on stablecoins.p

pThese are tokens pegged to the value of traditional assets, often the U.S. dollar, and are the main medium for moving money between cryptocurrencies or to convert balances to fiat cash.p

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

p“For these types of stablecoins, the market needs to trust that the issuer holds sufficient liquid assets they would be able to sell in times of market stress.”p

pTether has recovered to parity on the dollar and its operating company says it has the necessary assets in Treasuries, cash, corporate bonds and other moneymarket products.p

pBut it is likely to face further tests if traders keep selling, and analysts are concerned that stress could spill over into money markets if pressure forces more and more liquidation. p

pEther, the secondlargest cryptocurrency by market capitalisation, steadied near 2,000 on Friday after a drop as low as 1,700 on Thursday. Bitcoin and ether are about 60 below record peaks reached in November.p

pCryptorelated stocks have also copped a pounding, with shares in broker Coinbase steadying overnight but still down by half in little more than a week.p

pIn Asia, Hong Konglisted Huobi Technology and BC Technology Group, which operate trading platforms and other crypto services, eyed weekly drops of more than 15.p

pAmid the turmoil, Nomura on Friday said it had begun offering bitcoin derivatives to clients, the latest move by a traditional financial institution into the asset class.p

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pp Reporting by Tom Westbrook and Alun John.p

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