Bitcoin eyes record losing streak as 'stablecoin' collapse crushes crypto

Bitfire group

13/05/2022 04:34

SINGAPORE, May 13 (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 so-called
stablecoin, rippled through markets.
    Crypto 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.
    Bitcoin  BTC=BTSP , 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 16-month low
of around $25,400 reached on Thursday.
    It remains a long way below week-ago levels of around
$40,000 and, unless there is a rebound in weekend trade, is
headed for a record seventh consecutive weekly loss.
    "I don't 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.
    "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 that's when I think
the market will stabilize."
    TerraUSD (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.  urn:newsml:reuters.com:*:nL2N2X30RZ
    Tether, 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.
 urn:newsml:reuters.com:*:nL2N2X42K9
    
    UNSTABLE
    Selling 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.
    These 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.
    "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.
    "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."
    Tether has recovered to parity on the dollar and its
operating company says it has the necessary assets in
Treasuries, cash, corporate bonds and other money-market
products.
    But 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.
   
    Ether  ETH=BTSP , the second-largest 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.
    Crypto-related stocks have also copped a pounding, with
shares in broker Coinbase  COIN.O  steadying overnight but still
down by half in little more than 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, eyed weekly drops of more than 15%.
    Amid the turmoil, Nomura  8604.T  on Friday said it had
begun offering bitcoin derivatives to clients, the latest move
by a traditional financial institution into the asset class.

 (Reporting by Tom Westbrook and Alun John.)
 ((tom.westbrook@tr.com; +65 6973 8284;))