- Bitcoin traded as high as $32,900 on Monday, sparking fears across the industry.
- It hasn’t been at this price level since January 2022.
- The Terra stablecoin could lead to an even bigger drop in the asset created by Satoshi Nakamoto.
The rate hike by the US FED caused a strong disruption in the stock markets that also affected cryptocurrencies.
Indeed, the price of bitcoin, by far the most important digital asset by trading volume, price and community, fell back to values at the beginning of the year.
Bitcoin is trading this Monday, May 9, at $32,900, value that it has not shown since January 2022, a point considered as a floor that, if broken, could take the digital asset created by Satoshi Nakamoto to 28 thousand dollars, or less.
Bitcoin started Monday at $33,200, after touching $32,950 in the late hours of Sunday.
The sharp decline in just three days is the most significant in percentage since that produced in July 2021.
Why is Bitcoin going down and what can you expect?
Analysts understand that Bitcoin’s price movements are not isolated and are in line with what is happening in other risk assets, such as shares of technology companies, which have also been hit by the latest economic news. global.
To the aforementioned rise in interest rates of the Federal Reserve (FED), the central bank of the United States, adds that the war in Ukraine after the invasion of Russia has no end and does not seem to have it in the short term.
All these facts, plus the exit of the coronavirus pandemic and the logistical difficulties of the supply chains, are generating a very negative scenario for risk assets, such as the papers of technology companies and Bitcoin.
Nasdaq, for example, fell 1.6 percent in the first week of May and has already fallen 21 percent so far in 2022.
These stocks are hurt by persistent inflation forcing the Federal Reserve to raise rates despite slowing growth.
And this Monday it seems that everything is going to get worse, as Nasdaq futures fell 0.9 percent in trading on Asian stocks.
What about the Terra stablecoin and how it affects the price of Bitcoin
Another issue that has affected the price of Bitcoin is the notoriously low liquidity of the crypto market throughout the weekend and the conjunctural fear that the algorithmic stablecoin called Terra (UST) could lose its parity with the US dollar.
Stable coins or starcoins are digital tokens linked to traditional assets, in most cases, the dollar.
The UST listing is being closely watched by the crypto community for the novel way it maintains its 1:1 peg to the dollar. It does so from a reserve of US$10 billion in bitcoin, which is why its volatility is feared.
If UST loses parity, the impact could potentially spill over to bitcoin markets.
Etherthe world’s second largest cryptocurrency, a token that underpins the ethereum network, fell to $2,420, its lowest point since February 2022.
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