It’s been a turbulent week for cryptocurrency investors. Bitcoin, the flagship cryptocurrency, has seen its price tumble by almost 20% in just a few days. This has had a knock-on effect on other cryptocurrencies, with Ethereum seeing an even bigger double-digit percentage drop in value.
In addition, Coinbase — one of the world’s largest crypto exchanges — saw its market value drop by more than a third.
Bitcoin’s price dropped as low as $25,338 (roughly £20,658) this Thursday, its lowest since December 2020. The cryptocurrency’s supporters advocated that Bitcoin could protect its holders against inflation and act as a hedge against a decline in the stock market, neither of which seems to be happening.
The USA’s Federal Reserve aggressively raises interest rates in hopes of shrinking inflation, to which individuals are responding by dumping risky assets, such as stocks and crypto.
However, the biggest loser is one of the stablecoins – TerraUSD, whose freely floating token Luna lost over 99% in value.
But isn’t a stablecoin supposed to be…stable?
Stablecoins are viewed as the least risky amongst all cryptocurrencies because their value is pegged to a fiat currency or other asset, mainly the US dollar.
TerraUSD is an algorithmic stablecoin, meaning that its value is backed by a reserve of other assets, including other cryptocurrencies. In Terra’s case, that’s Luna.
If you want to learn more about TerraUSD’s collapse, check out our article here.
Last but not least, Coinbase, the largest US cryptocurrency exchange, saw its market value drop by more than a third this week. Following the drop, Coinbase reported a 19% fall in active monthly users in the first quarter.
The sell-off was driven by a combination of factors, including the recent crypto crash and worries about new regulations being imposed on the industry.
Coinbase noted that the current market conditions aren’t permanent in a letter to its shareholders and that things will get better. In turn, today, Coinbase’s share price suddenly rose 16% and now stands at $67.87 (roughly £55.34).
This week has been absolutely horrible for cryptocurrency investors. With Bitcoin’s price tumbling, and Coinbase losing a significant portion of its value, it’s questionable if things will get better any time soon.
We’ll be sure to keep you updated on all the latest crypto news, so make sure to stay tuned!