It hasn’t been a good year for cryptocurrency pundits, given the incredible losses felt throughout the realm since Jan. Prices, though already highly volatile, have been a frenzied rollercoaster ride hitting a remarkable $205 billion market cap decline within 24 hours earlier this year.
Since then, it’s only gotten worse, as expressed best in Bitcoin’s dramatic dip below the $30,000 mark midday on Tuesday, May 10th, dropping as far down as $29,026, a price point not felt since 2020 Dec. Though rebounding shortly after, settling at an average of $31,000, the vast fluctuations prove that Bitcoin is experiencing massive pressure in a well-tinged market in the red.
While Bitcoin remains the posterboy, it isn’t alone in the downward-spiraling arena. Similar digital currencies are in steady decline; Ethereum hit a 22% dip over the past week, now sitting at a $2,200 average figure, its lowest since July of last year; Cardano and Solana witnessed a respective 6% and 8% drop; Polygon sits at a 19.4% dip. Other so-called “memecoins” are also plunging, from the likes of Shibu Inu’s 9% to Dogecoin’s 8% decrease.
Cryptocurrency Prices by Coinlib
Much of the red can be attributed to the market as a whole, but also the spiraling stablecoin TerraUSD, which is mostly backed by Bitcoin through Luna. The stablecoin is intended to be on par with the US dollar, hence its stablecoin moniker. However, TerraUSD operates somewhat differently in that it relies heavily on arbitrage opportunities, allowing holders to sell off (or “burn”) their TerraUSD for $1 of Luna.
Unfortunately, Luna, which is backed most prominently by Bitcoin, also plummeted alongside the market, creating somewhat of a dire situation for TerraUSD holders. The stablecoin’s slight depeg from the dollar on Sunday created a panic selloff, which then has caused the entire market to feel the impact. Little can aid the failing crypto Luna or its stablecoin as fears across the crypto world ring loud as the meltdown selloff intensifies.
CEO of crypto derivatives firm FRNT Financial, Stephane Ouellette, relays to Barrons, “The ongoing situation with [TerraUSD] has caused widespread anxiety in the crypto space. Ether and Bitcoin are performing relatively in line with recent selloffs. However, it remains unclear if the coins can maintain current levels considering the evolving [TerraUSD] situation which lacks a clear avenue towards resolution.”
As mentioned previously, the conventional market itself, though bouncing back only slightly from the lows witnessed on Monday, May 9, also heavily influences the crypto world, most prominently via both the Nasdaq Composite and the S&P 500, both of which are certainly not aiding in the already dire situation. The still-rising Federal Reserve’s interest rate increases are adding to these issues, pushing both stocks and crypto prices into the dirt.
“The crypto market has been under pressure for some time now. The Fed keeps hiking, so equities keep going down and crypto’s been going down along with it,” explains AscendEx’s Michael Rinko to CNBC. “Generally that’s created a lot of fear in the market.”
The mood, although worrisome to most, is being looked at by others as an opportunity to buy the dip. Major cryptocurrency enthusiasts are attempting not only to crop up their most cherished coins but also to acquire as much as possible in the astronomical lows witnessed over the past several days. Even the first Bitcoin tenderer El Salvador is scooping up as much as it can as the country experiences a 28% overall loss on the digital asset.