New York (AP) — Even cryptocurrency standards were a wild week for cryptocurrencies.
Bitcoin fell and Stablecoin was not stable. One of the most well-known companies in the crypto industry has lost one-third of its market value.
Let’s take a look at some of the major developments of cryptocurrencies this week:
According to CoinDesk, Bitcoin’s price has fallen to about $ 25,420 this week, the lowest level since December 2020. Friday was stable at around $ 30,000, but still less than half the price Bitcoin acquired last November.
Some Bitcoin proponents say that digital currencies can protect their holders from inflation and act as a hedge against the decline in the stock market. Neither has been done recently. Consumer-level inflation rose 8.3% in April compared to a year ago. This is the last level seen in the early 80’s. Investors are dumping high-risk assets such as stocks and cryptocurrencies as the Federal Reserve is aggressively raising interest rates to curb inflation. The S & P 500 has fallen by more than 15% this year. Bitcoin has fallen by about 37% so far.
Other ciphers didn’t work either. Ethereum has fallen 44%, and Dogecoin, a cryptocurrency backed by Tesla CEO Elon Musk, has lost about half its value.
Collapse of STABLECOIN
Stablecoin has been regarded as a safe harbor among cryptocurrencies. This is because the value of many stablecoins is fixed to government-sponsored currencies such as the US dollar or precious metals such as gold.
But this week, one of the more widely used stablecoins, Terra, experienced a cryptocurrency equivalent to a run on the bank.
Terra is a stablecoin of the crypto ecosystem known as Terra Luna. Terra is an algorithmic stablecoin. In other words, complex buying and selling adjusts the supply to keep the pegs at $ 1. Terra was also backed by an incentive program that gave owners high yields at Terra. Luna is a coin intended to be used to buy and sell assets in the ecosystem and was worth more than $ 100 at its peak.
The Terra developers said the algorithm would backstop Stablecoin, but decided to backstop it further by holding Bitcoin.
Terra’s problem began with a combination of hundreds of millions of dollars, perhaps billions of dollars, from Anchor, a platform that supports stablecoin. Coupled with general concerns about cryptocurrencies and falling Bitcoin prices, Terra has begun to lose its peg to the dollar. Bitcoins owned by Terra were also less valuable than they paid, and by marketing them to the market, Bitcoin prices fell even further.
Terra developer efforts to increase liquidity have failed. On Friday, Terra fell to 12 cents and Luna was trading at less than 1 / 10,000 of a penny.
Coinbase lost about one-third of its value this week. Meanwhile, the cryptocurrency trading platform reported a 19% decline in active monthly users in the first quarter amid a decline in crypto value.
Investors were heading for the exit before Coinbase reported a quarterly loss of $ 430 million. Friday’s stock closed at $ 67.87. Just 13 months ago, on the day of the initial public offering, the shares reached $ 429 each.
In a letter to shareholders, Coinbase said it believes that current market conditions are not permanent and remain focused on the long term while prioritizing product development. Most Wall Street analysts expect Coinbase to survive the storm, but also warn that tighter cryptocurrency regulations could hinder the company’s growth.
There has been a lot of talk about cryptocurrency regulation, but there are few ways to act.
In response to this week’s crypto market volatility, Treasury Secretary Janet Yellen said Thursday: The United States needs a regulatory framework To protect against the risks surrounding cryptocurrencies and stablecoins.
In March, Federal Reserve Chairman Jerome Powell said new forms of digital money, such as cryptocurrencies and stablecoin, pose a risk to the US financial system. Need new rules To protect consumers. Just before the collapse of Terra this Monday, the Fed said in a semi-annual report on financial stability that Stablecoin is vulnerable to “runs” that could harm coin owners. Said.
Gary Gensler, chairman of the Securities and Exchange Commission, said the cryptocurrency industry is “full of fraud, fraud and abuse,” and his agency has more authority from Congress to regulate the market. And need more money.
UK announced Plan to regulate stablecoin As part of a broader plan to become a global hub for digital payments.European Union lawmakers have agreed Draft rules In the case of crypto assets, we still need to negotiate the final bill.
Contributed by AP Economics writer Christopher Rugaber and AP Technology writer Michael Liedtke.