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Bitcoin price fell below $30,000 on Tuesday for the first time since July 2021, taking its decline from its November high to nearly 55% amid a global flight from riskier investments.
The world’s largest digital token fell 3.9% to $29,764 in Asia before shrinking the segment. It was trading at $30.850 as of 11:28 am in Singapore. Ether, the second largest token, has recovered with small gains. Other coins such as Solana and Avalanche are still red.
“We’re seeing a slow crash, in part because it’s been mostly selling off long-term owners” rather than leveraged liquidations, said Josh Lim, head of derivatives at New York-based Genesis Global Trading. “Now that some corporate Treasuries are hovering near the cost basis, markets are waiting and watching to see if shareholders impose some risk aversion.”
The swoon in cryptocurrencies comes as monetary tightening to combat hyperinflation is squeezing liquidity, keeping investors away from speculative assets.
Michael Novogratz, the billionaire cryptocurrency investor who leads Galaxy Digital Holdings Ltd. He expects things to get worse before they get better.
“Crypto trades will likely be tied to the Nasdaq until we reach a new equilibrium,” Novogratz said on Galaxy’s first-quarter earnings call on Monday. “My instinct is that there is more damage to be done, and this is going to be trading in a very volatile, volatile and difficult market for at least the next few quarters before people feel we are in equilibrium.”
The crypto market is also keeping an eye on TerraUSD, an algorithmic stablecoin that aims to maintain a one-to-one peg to the dollar. The peg appears to have eroded, with the value of the coin dropping below 70 US cents on Tuesday, according to CoinGecko data.
Do Kwon, founder of Terraform Labs, which operates the Terra blockchain, is moving to support the stablecoin.
The Luna Foundation Guard, an association set up to support decentralized tokens and the Terra blockchain, said it will issue about $1.5 billion in loans in Bitcoin and TerraUSD to help strengthen the TerraUSD link.
Kwon grabbed the crypto world’s attention earlier this year by pledging to buy up to $10 billion in Bitcoin to back Terra.
“We are watching carefully to see how market prices move over the next 24 hours,” Stephen Goldin, chief research analyst at crypto market maker Cumberland DRW, said in an email. “Including whether the mechanisms being introduced to help increase adoption, such as lending LFG Bitcoin to over-the-counter trading firms, will be sufficient to hold them in times of high stress or if we need additional stabilization mechanisms.”
Bitcoin’s decline puts it at risk of withdrawing firmly from the range it traded in in 2022, reversing the recent bullish trend that pushed the coin to a record high of nearly $69,000 in November.
With its 40-day correlation to the S&P 500 stock index around a record low, according to data compiled by Bloomberg, any additional damage to stock sentiment would risk dragging Bitcoin lower as well.
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