- The drop in the price of Bitcoin set off all the alarms in the cryptocurrency market.
- Stable currencies, or stablecoins, are at the center of the debate: European regulators and financial authorities say they are dangerous and vulnerable.
- The splinters continue after the collapse of the Terra (LUNA) project.
Cryptocurrencies in general and bitcoin in particular They continued to fall this Monday, May 16 consolidating a collapse price compared to the values of the beginning of May.
Within a few hours, bitcoin lost the gains it had made over the weekend, when it topped $31,000 and fueled expectations of a bullish raid.
But this did not happen, because in the early hours of Monday the price fell below 30 thousand dollars, maintaining a lateral movement that has already lasted more than seven days.
For the most pessimistic analysts, this is just one more step in the decline to 22 thousand dollars, where another of the supports for the bitcoin price is found, in a market that they have considered bearish for at least three months.
The Bitcoin Price Collapse, Stablecoins, and Regulations
Part of the responsibility for this new drop in the price of bitcoin is due to the fact that different heads of financial regulatory bodies in Europe reiterated the warning about the risk posed by investing in cryptocurrencies, including bitcoin.
Bitcoin fell 5 percent to around 29,650 on Monday as markets in Asia opened. It fell along with the shares of the vast majority of companies due to the scenario of continued concern regarding the rise in inflation and the increase in interest rates.
with the collapse, Bitcoin has lost about a quarter of its value so far in May also because of the phenomenal crash of the Terra project which saw the price of the LUNA token fall by more than 99 percent in a couple of days.
From the 119 dollars that it had come to trade in March, when it was even one of the top 10 cryptocurrencies by volume of transactions, it fell to 0.0001 dollars on Friday, May 13.
Along with LUNA, the project’s stablecoin, Terra USD ($UST), broke its 1:1 parity with the dollar, falling as low as 15 cents.
This generated fears regarding the stability of the rest of the stablecoins, currencies that are supposed to keep their price stable with respect to other assets, in general, the dollar. Situation that gives them a key role in the exchange of cryptocurrencies.
These days stablecoins are the focus of attention of financial regulators as they warn that their price is not sustainable over time.
The Governor of the Bank of France, François Villeroy de Galhausaid at a conference on Monday that crypto assets could disrupt the international financial system, so they must be regulated in a consistent and unified manner across all jurisdictions.
He also said that stablecoins are misnamed, and They are a source of risk.
Fabio Panetta, member of the executive board of the European Central Bank, also spoke on the subject and he called stablecoins “vulnerable to runs.”
Tether (USDT), the world’s largest stablecoin, briefly lost its 1:1 parity on May 12, before recovering.
Unlike Terra USD, Tether is backed by reserves in traditional assets, according to its operating company.
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