Nightmare week like few are remembered in these young digital assets despite their traditional volatility. Since Thursday, the price of the crypto universe, represented by the Bloomberg Galaxy Crypto index, has plummeted 35%. In terms of capitalization, the avalanche of sales has devoured no less than US$700,000 million and fear is rampant.
Especially negative was Thursday the 12th, which could perfectly acquire the category of black thursday for digital assets and find a place in the calendars of crypto investors. On that day alone, more than US$200 billion in market capitalization was volatilized in a selloff that swept all crypto titles.
“This week will probably go down in history as one of the worst weeks in crypto history,” says Alejandro Zala, head of Bitpanda in Spain.
Bitcoin, considered the king of cryptocurrencies, lost more than 28.2% of its value in a week and its price sank below US$30,000 for the first time since the end of 2020. So far this year, the virtual currency has lost 36% and the historical maximums it marked in November 2021 above the US are far away. $67,000.
The key behind the latest falls in the entire crypto universe is in the field of stablecoins (stable currencies), a type of virtual asset whose value is apparently stable as it is linked to an asset or basket of real assets. This principle, which until now had not been questioned, was blown up this week with the collapse of TerraUSD.
This coin, which should be tied to the price of the US dollar, it became unstuck from its peer in the face of doubts about the capabilities of the guarantor company, which has set off alarm bells over the entire system.
Unlike central banks, the great risk of stable currencies is the bankruptcy of the entities or companies that support them, so their link with the dollar or the chosen real currency depends on the trust in the collateral they have deposited and now doubts lurk throughout the universe of crypto assets.
The collapse of TerraUSD is fueling mistrust in other stablecoins like Tether, the one with the largest volume in the world and which also lost parity with the dollar.
The foundations on which one of the most far-reaching agents in the cryptographic universe is based, the stable coins, are in the air and doubts undermine all the others.
But after the storm there is always calm or, at least, a certain rebound. Crypto market analysts consider that the universe of digital assets may have reached a kind of capitulationto that moment when the mood is completely rock bottom and bullish investors give up in the face of huge losses.
The fear and greed index of this market, an indicator of the sentiment that prevails in cryptocurrencies, shows 10 points out of 100, that is, it is anchored in a state of extreme fear.
And it is that state of total disenchantment in which in the end some brave people decide to take sides. In the trading session on Friday, the crypto index heads higher, with bitcoin posting more than 5% gains and regaining important support at $30,000.
The rebound, in addition to a reaction to the sharp declines in valuations recorded in recent days, comes as a result of the recovery of the dollar parity of the world’s largest stable currency, Tether, which had been questioned.
“What happened with Terra happened before with other stablecoins. When this ecosystem is regulated, it will not be so easy to see this type of mismatch, until that time comes we will see more cases,” says Alberto Gordo, founding partner of Protein Capital, a capital fund. Spanish risk specialized in cryptocurrencies.
With the impulse of the last day of the week, different analysts envision a short-term rebound that could propel the price of bitcoin even up to $40,000. However, despite the fact that recent doubts about the viability of stablecoin projects have been reduced, the environment remains very inauspicious for investment in cryptocurrencies and its price could remain under pressure in the medium term.