Bitcoin continued to slide after a broader stock sell-off in the U.S. last week sent the cryptocurrency market into a frenzy and prompted the cryptocurrency to plummet by roughly 10%.
Bitcoin, the world’s largest digital currency by market value, was down 5% to $32,860.91 at around 7:12 a.m. ET, according to data from Coindesk.
Bitcoin went on to hit an intraday low of $32,650.02, its lowest level since July 2021. The virtual currency has been trading in a narrow range this year as it attempts to reclaim its highs of late 2021.
The cryptocurrency giant many investors were optimistic about is now down more than 50% from its peak price of $68,990.90 in November 2021.
The Reason For The Bitcoin Slump?
The drop comes after the blue-chip Dow Jones Industrial Average lost more than 1,000 points on Thursday and the Nasdaq plunged by 5%. Those losses marked the worst single-day drops since 2020. The Dow and Nasdaq fell again on Friday.
Meanwhile, the Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point in response to inflation pressures.
The stock market rallied after Fed chair Jerome Powell said a larger rate hike of 75 basis points isn’t being considered. But by Thursday, investors had erased the Fed rally’s gains.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that the overall markets remain under pressure from inflation and growth fears and this is the main reason for the meltdown amongst investors.
He went on to say that if bitcoin falls below $30,000, it could even drop further to $25,000 before it makes any “significant” move back up.
The global market cap for cryptocurrencies was at $1.68 trillion on Sunday, according to data from CoinGecko.com, and cryptocurrency trading volume on the last day was at $119 billion.
Crypto investors were also on edge over the weekend after the TerraUSD stablecoin briefly lost its dollar peg.
A stablecoin is a digital currency designed to peg its value to real-world assets. Issuers of stablecoins often back their virtual currencies with other assets held in reserves.
Investopedia describes stablecoins as a class of cryptocurrencies that attempt to offer price stability and are backed by a reserve asset. Stablecoins have gained traction as they attempt to offer the best of both worlds – the instant processing and security or privacy of payments of cryptocurrencies, and the volatility-free stable valuations of fiat currencies. In this case, TerraUSD aims to be pegged to the U.S. dollar.
The Luna Foundation Guard, which is behind TerraUSD, has been buying up large amounts of bitcoin in its reserves.
However, the price of TerraUSD briefly slipped away from parity with the U.S. dollar over the weekend before recovering. This has sparked fears that the Luna Foundation Guard could sell bitcoin to prop up TerraUSD.
Ayyar went on to say that the crypto markets are also a bit nervous after UST (Terra stablecoin) lost its peg briefly over the weekend.
Chris Kline, co-founder of Bitcoin IRA, said much of the recent fade in crypto prices simply stems from investors reacting to what’s happening in the broader economy.
When the stock market stumbles, many investors move