Bitcoin is rolling, one stablecoin falls in crypto in wild week



NEW YORK (AP) – It’s been a crazy in , even by standards.

tumbled, stablecoins were anything but stable, and one of the crypto industry’s most high-profile companies lost a third of its market cap.

Here’s a look at some of the key developments in cryptocurrencies this week:

bitcoin

Bitcoin price dropped to $25,420 this week, its lowest level since December 2020, according to CoinDesk. It pegged around $30,000 on Friday, but that’s still less than half the price of bitcoin bought last November.

Some bitcoin advocates said the digital currency could protect its holders against inflation and act as a hedge against the stock market crash. Recently, neither has been done. Consumer-level inflation rose 8.3% in April compared to a year ago, a level last seen in the early 80s. As the Federal Reserve aggressively raises interest rates to try to curb inflation, investors are abandoning risky assets, including stocks and crypto. The S&P 500 is down more than 15% this year. Bitcoin is down about 37% to date.

Other cryptos have likewise failed. Ethereum is down 44% and dogecoin, a cryptocurrency favored by Tesla CEO Elon Musk, is down 53%.

CRASH

Stablecoins are seen as a safe haven among cryptocurrencies. This is because the value of many stablecoins is pegged to a government-backed currency like the US dollar or precious metals like gold.

But this week, Terra, one of the more widely used stablecoins, experienced the cryptocurrency equivalent of transacting at the bank.

Terra is a stablecoin that resides in a cryptocurrency ecosystem known as Terra Luna. Terra is an algorithmic stable coin; this means that it adjusts its supply through complex buying and selling to keep its fixed value at $1. Terra was also supported by an incentive program that gave its owners high yields on their Terras. Luna was the coin intended to be used to buy and sell assets in the ecosystem, and was valued at more than $100 at its peak.

Although Terra’s developers said their algorithm would support the stablecoin, they decided to stop further with Bitcoin holdings.

Terra’s problems began with a combination of withdrawals of hundreds of millions, perhaps billions, from Anchor, a platform that supports the stablecoin. Combined with general concerns about cryptocurrencies and the drop in bitcoin price, Terra is starting to lose stability against the dollar. The bitcoin Terra held was also less valuable than what he paid for, and selling those bitcoins to the market caused bitcoin prices to drop even more.

Efforts by Terra’s developers to increase liquidity have failed. On Friday, Terra fell 14 cents and Luna was trading less than a ten-thousandth of a cent.

COINBASE

Coinbase has lost nearly a third of its value this week, and the cryptocurrency trading platform reported that active monthly users fell 19% in the first quarter amid the decline in crypto values.

Even before Coinbase reported a quarterly loss of $430 million, investors were running for exits. Shares closed at $58.50 on Thursday. On the day of its IPO just 13 months ago, the shares were up to $429 each.

In a letter to shareholders, Coinbase said it believes current market conditions are not permanent and continues to focus on the long-term while prioritizing product development. While most Wall Street analysts expect Coinbase to weather the storm, they also warn that increased regulation of cryptocurrencies could hinder the company’s growth.

REGULATORS

There has been a lot of talk about the regulation of cryptocurrencies, but little in the way of action.

Responding to the volatility in crypto markets this week, Treasury Secretary Janet Yellen said on Thursday that the United States needs a regulatory framework to guard against the risks surrounding cryptocurrencies and stablecoins.

In March, Federal Reserve Chairman Jerome Powell said that new forms of digital money such as cryptocurrencies and stablecoins pose risks to the US financial system and will require new rules to protect consumers. This Monday, just before Terra’s boom, the Fed said in its semi-annual report on financial stability that stablecoins are vulnerable to “exits” that could harm coin holders.

Gary Gensler, Chairman of the Securities and Exchange Commission, said that the crypto industry is “ridden with fraud, fraud and abuse” and that his agency needs more power – and more funding – from Congress to regulate the market.

The UK has announced plans to regulate stablecoins as part of its plan to become a global hub for digital payments. European Union lawmakers have agreed on draft rules for cryptoassets, but they still have to negotiate a final bill.

Copyright © 2022 The Washington Times, LLC.





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

(0)