Cryptocurrency Market Turmoil: Bitcoin and Ether Hit Lows Amidst Inflation and Stablecoin Concerns

Bitcoin investors got panicked by the fall of bitcoin below $27,000 for the first time in over 16 months, cryptocurrency markets extended losses amid fears over rising inflation and the collapse of a controversial stablecoin project.

The price of bitcoin plunged as low as $25,845.20 Thursday morning, according to Bitstamp data. That marks the first time bitcoin has sunk below the $27,000 level since Dec. 30, 2020.

As of 1:30 a.m. ET, bitcoin was trading at $27,061, down 15% in the last 24 hours.

Ether, as the second-biggest digital currency, tanked to as low as $1,789 per coin. It’s the first time the token has fallen beneath the $2,000 mark since July 2021.

Ether was last down 24% at a price of $1,785.

Investors are fleeing from cryptocurrencies at a time when stock markets have plunged from the highs of the coronavirus pandemic on fears over soaring prices and a deteriorating economic outlook. U.S. inflation data out Wednesday May 11th showed prices for goods and services jumping 8.3% in April, higher than expected by analysts and close to the highest level in 40 years.

Read more on how to acquire a crypto license in Hong Kong

On the other hand,

TerraUSD, (UST), is supposed to mirror the value of the dollar, but it plummeted to less than 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.

While Stablecoins are similar to bank accounts which are barely regulated Crypto. These digital currency investors usually turn to these investments for the sake of safety in the times of volatility in the market.

As of Thursday May 12th morning, UST was trading at about 62 cents, still well below its intended $1 peg.

Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, erased 97% of its value in 24 hours and was last worth just 30 cents, even less than UST.

It seems that Investors are scared because of the implications of bitcoin. The fear rises because Luna Foundation Guard will sell a large amount of its bitcoin holdings, which will shore up its ailing stablecoin. It is a risky gambling, that refers to the fact that bitcoin itself is an incredibly volatile asset.

Also Adding to investors’ fears that Thursday May 12th Morning was a drop in the value of tether, the world’s biggest stablecoin. The token at one point slipped to 95 cents. Economists have long feared that tether may not have the required amount of reserves to bolster its dollar peg in the event of mass withdrawals.

As investors in crypto-currencies continue to withdraw from crypto and reinvest their money back into traditional markets (such as stocks), it’s likely that we will see a similar trend over time among other cryptocurrencies. Experts also are predicting that in 2022, cryptocurrencies will only account for 1% of global spending on goods and services.

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