Bitcoin’s price has fallen to its lowest point since July last year, plunging towards $43,000 (US$30,000) this week as economic fears startle the cryptocurrency and stock markets.
Bitcoin fell from its all-time high of about $91,000 (US$67,000) last November and has since struggled to stabilize in an environment of mounting inflation to which central banks have responded by pulling back on pandemic-induced quantitative easing measures while simultaneously tightening the rules. to raise interest rates.
A sell-off on Wall Street this week, led by tumbling technology stocks, has accelerated Bitcoin’s fall as its price fell nearly 10 percent overnight Monday and other major cryptocurrencies followed suit.
Cryptocurrency analysts and market watchers suggest that the correlation between crypto and mainstream market prices will persist as long as investors maintain their risky stance.
Edward Moya, a senior analyst for currency trader Oanda, is optimistic that the crypto crash has little to do with the underlying technology and future demand for the digital assets, according to CoinDesk†
“Long-term fundamentals remain in place for bitcoin, but a return to record highs will take a long time,” he said.
“Bitcoin will begin to stabilize when the Wall Street carnage ends and at this point many investors are still in panic sell mode.”
Similarly, Galaxy Digital Holdings CEO Michael Novogratz told investors this week that crypto would continue to trade alongside the tech-heavy Nasdaq for now, according to Bloomberg†
“My instinct is that more damage needs to be done,” he said.
“And that [we] We will be trading in a very choppy, volatile and difficult market in the coming quarters before people start to feel we are in equilibrium.”
All of the leading FAANG stocks — an acronym used to describe Alphabet’s Meta (formerly Facebook), Apple, Amazon, Netflix and Google — fell during Monday night’s trading session, with Amazon taking the biggest blow, dropping five percent.
Meta and Netflix, meanwhile, are continuing the price drops caused by the posting companies declines in user numbers earlier this year.
While it has shown a correlation between US technology stocks and cryptocurrency, the sudden drop in crypto values has put emphasis on parts of the wider crypto ecosystem as stablecoin TerraUSD (UST) lost its peg to the US dollar.
As the name suggests, stablecoins are designed to hold a specific value to provide investors with less volatile assets that are still interoperable with the rest of the crypto ecosystem.
UST is the preferred stablecoin of the Terra blockchain.
Beginning Tuesday afternoon, UST was trading at 78 cents, still below the $1 target but slightly back from the weekend low of 68 cents.
UST has de-pegged in the past, but never as severely as this week’s slip – as a result, the price of Terra’s native coin Luna has fallen 60%.