SAINGAPORE/HONG KONG (Reuters) – Bitcoin recovered some ground on Friday after falling to its lowest level in 16 months the previous day, as its status as a cryptocurrency star did not prevent it from suffering from the collapse of the TerraUSD and the general movement of mistrust towards financial assets deemed the most risky.
Once perceived as instruments of protection against inflation, all cryptoassets have suffered for several weeks from the rise in the dollar favored by the rise in US interest rates. But this movement has suddenly amplified in recent days to the point of raising fears of contagion to other markets.
Bitcoin, the main cryptocurrency by its overall market value, gained 4.57% to 30,217.32 dollars at 08:30 GMT against 25,401 dollars in session the day before, its lowest level since December 2020.
But even taking into account this incipient rebound, it shows a fall of more than 35% compared to its peak at the end of March at more than 48,000 dollars, and of nearly 25% in nine sessions. And it is heading for its seventh negative weekly performance in a row, unheard of since its creation.
« I don’t think the worst is over, » warns Scottie Siu, chief investment officer of Axion Global Asset Management, a Hong Kong company that manages a fund specializing in « cryptos ».
“I believe there is still downside potential for the next few days. I think it takes a much steeper collapse in open positions, for the speculators to really get out and the market to finally stabilize.”
THE FALL OF THE TERRAUSD SHOCKED THE ENTIRE MARKET
The entire « crypto » market has been shaken in recent days by the fall of TerraUSD, a « stablecoin », a digital token (token) whose value is linked to that of a « classic » asset, in the occurrence the US dollar, and therefore supposed to escape the sudden and often violent fluctuations of other cryptoassets.
However, the Terra USD (USDT) broke through the parity threshold with the greenback this week, the complex mechanism supposed to ensure its stability, which is based on another digital token, having not resisted a pressure to sell exceptionally strong. It was only worth about 10 cents on Friday.
Tether, the most important of the « stablecoins », whose creators assure that it is backed directly by dollar assets, is also under pressure and it fell to 95 cents on Thursday according to data from CoinMarket Cap, before recovering to a dollar on Friday.
In total, the cumulative capitalization of all cryptocurrencies now represents only half of its November level, the decline having transformed in recent days into a movement of near-panic with doubts about « stablecoins », commonly used to carry out transfers between crypto-assets or a conversion into currencies.
THE MARKET NEEDS TO HAVE CONFIDENCE IN ISSUERS
“More than half of all bitcoin and ether traded is against a stablecoin, USDT and Tether for the most part,” Morgan Stanley analysts explain in a note.
« For this type of stablecoin, the market needs to have confidence that the issuer has enough liquid assets to be able to sell during times of market stress. »
The company that operates the Tether said it has the necessary assets in US Treasuries, cash, corporate bonds and money products.
But Tether is likely to be tested again if traders start selling again and some analysts fear that the movement will take over the money markets.
Ether, the second largest cryptocurrency by capitalization, was trading at just over $2,000 on Friday after falling to $1,700 the previous day, nearly 60% below its November peak.
These declines logically affect listed companies specializing in crypto-assets, such as Coinbase, the sector’s main trading platform, whose stock market value has fallen by 55% in six sessions.
(Report Tom Westbrook and Alun John, French version Marc Angrand, edited by Jean-Michel Bélot)
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