NEW YORK (AP) – It’s been a wild week in the cryptocurrency industry, even by cryptocurrency standards.
Bitcoin has collapsed, stablecoins are nothing but stable, and one of the highest -profile companies in the cryptocurrency industry has lost a third of its market value.
Here are some key cryptocurrency developments this week:
According to CoinDesk, the price of Bitcoin has fallen to approximately $ 25,420 this week, the lowest since December 2020. It was about $ 30,000 on Friday, but it was still less than half the price of Bitcoin in November.
Some Bitcoin proponents say the digital currency can protect its holders from inflation and act as a hedge against stock market collapse. Not even done lately. Consumer -level inflation rose 8.3% in April compared to the previous year, the most recent in the early 1980s. When the Federal Reserve aggressively raises interest rates to reduce inflation, investors throw away risky assets, including stocks and cryptocurrencies. The S&P has fallen more than 15% in the year 500. Bitcoin has fallen about 37% to date.
Other cryptocurrencies have also done badly. Ethereum fell 44%, while dogecoin, the cryptocurrency backed by Tesla CEO Elon Musk, fell 53%.
Stablecoins are considered a safe haven in cryptocurrencies. This is because the value of many stable currencies is tied to government -backed currencies such as the US dollar or precious metals such as gold.
But this week one of the most used Stablecoin, Terra, experienced the equivalent of a cryptocurrency running in a bank.
Terra is a stablecoin in the cryptocurrency ecosystem known as Terra Luna. Terra is an algorithmically stable coin, which means it moved its delivery through hard buy-sell to hold it up to $ 1. Terra was also activated with an incentive program that gave holders- its owners of high income in their Land. Luna is a coin designed to buy and sell assets in an ecosystem and is worth over $ 100 at its maximum.
Although Terra’s developers said its algorithms block Stabilcoin, they decided to stop it even further by owning Bitcoin.
The problems on Earth began with hundreds of millions, possibly billions of dollars, of withdrawals from Anchor, a platform that supported Stabilcoin. Concerned about cryptocurrencies as a whole and the drop in the price of Bitcoin, Terra began to lose ground against the dollar. Terra’s bitcoin ownership is also less than they paid for, and the sale of this bitcoin on the market led to a further drop in bitcoin prices.
Attempts by Terra developers to increase liquidity were unsuccessful. On Friday, Earth dropped to 14 cents and Luna was trading under 1000 cents.
Coinbase lost nearly one-third of its value this week, with the cryptocurrency trading platform reporting monthly active users down 19% due to the decline in cryptocurrencies in the first quarter.
Investors are looking to exit before Coinbase even announces a quarterly loss of $ 430 million. The stock closed at $ 58.50 on Thursday. Just 13 months ago, on the day of its initial public offering, the stock reached $ 429 per share.
In a letter to shareholders, Coinbase said they believe current market conditions are not consistent and remain focused on the long-term outlook, prioritizing product development. While most Wall Street analysts expect Coinbase to experience a storm, they also warn that more cryptocurrency regulation could hamper the company’s growth.
There has been a lot of talk about cryptocurrency regulation, but little about the path to action.
Treasury Secretary Janet Yellen, responding to volatility in cryptocurrency markets this week, said on Thursday The United States needs a regulatory framework to protect you from the surrounding risks of cryptocurrencies and stablecoins.
In March, Jerome Powell, chairman of the Federal Reserve, said that new forms of digital currency, such as cryptocurrencies and stablecoin, pose risks to the U.S. financial system and require new rules to protect consumers. This Monday, before the attack on Earth, the Fed said in its semi-annual financial stability report that stablecoins are vulnerable to “flips” that could hurt coin owners.
Gary Gensler, chairman of the Securities and Exchange Commission, said the cryptocurrency industry was “full of fraud, deception and insults” and his agency needed more authority from Congress – and more funding – to regulate the market.
Great Britain published Plan to organize stable currencies As part of a broader plan to become a global hub for digital payments. EU parliamentarians have agreed to the Draft Rules For Cryptocurrencies, but the final bill still needs to be discussed.
AP Economics writer Christopher Rugaber contributed.
Source: Huffpost
