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It has been what some called a “very dark” week for crypto, with stablecoin TerraUSD, once the 10th largest cryptocurrency, losing its peg, while bitcoin fell to its lowest level since 2020. More than $450 billion in value was wiped out from the crypto market over the past seven days, according to CoinMarketCap.
Note: The list only includes moves of the top 100 largest cryptocurrency by market capitalization.
It’s the fourth day since TerraUSD, an algorithmic stablecoin designed to trade 1 to 1 against the U.S. dollar, fell off its peg for an extended period.
TerraUSD, or UST, once the 10th largest cryptocurrency by market capitalization, dropped to as low as 23 cents on the dollar on Wednesday, before it rebounded to 34 cents, according to CoinDesk data. LUNA, another cryptocurrency that backs UST, fell to as low as $0.03 Wednesday from over $80 on May 6.
Explained: What is an algorithmic stablecoin? Why is Terra in the news? Here’s what investors need to know.
As the losses were extended, Terraform Labs restarted the Terra blockchain to “prevent governance attacks,” it tweeted Thursday.
Total value locked on decentralized finance applications fell to $111.6 billion Thursday from $196.3 billion on May 6, according to data aggregator DefiLlama. Much of the losses come from Anchor, a once popular lending protocol on Terra, as it saw the value locked on it plunge from $17.1 billion on May 6 to $1 billion on Thursday.
However, as Terra collapsed, Ethereum saw its share climbed to from 50% to 57% in the DeFi space, as investors moved their funds “effectively in a form of flight to quality,” analysts at J.P. Morgan wrote in a Wednesday note.
“We believe that Terra’s fall will cause a flight to higher quality assets within the digital asset space, including greater outperformance by Bitcoin and Ethereum and underperformance for altcoins and DeFi assets,” John Darsie, partner at alternative investment firm SkyBridge wrote to MarketWatch in an email.
Tether, the largest cryptocurrency stablecoin by market cap, fell to as low as 95 cents against the dollar briefly on Thursday, before it recovered to about $1, according to CoinDesk data.
The company continues to “honour redemptions normally, with verified customers (in allowed jurisdictions) able to redeem USDt on Tether.to for USD$1,” according to a statement shared with MarketWatch.
Read: Terra crashed. What does it mean for other stablecoins? Here are the potential winners and losers
Treasury Secretary Janet Yellen said Thursday that the turbulence in the cryptocurrency market is not a hazard for the stability of the U.S. financial system, MarketWatch’s Greg Robb reported.
“I wouldn’t characterize it at this scale as a real threat to financial stability, but they’re growing very rapidly,” Yellen said, during testimony at the House Financial Service Committee.
Yellen said that Treasury’s Financial Stability Oversight Council was working on a report on the financial risk from digital assets. She called on Congress to pass a “comprehensive framework” to ensure there are no gaps in regulation.
Bitcoin fell as far as $25,402 Thursday, the lowest level since December 2020, according to CoinDesk data. The cryptocurrency is trading at around $28,217, down 5.4% over the past 24 hours.
The next key support stands at $21,500 level, Gavin Smith, CEO of Panxora.Io wrote to MarketWatch in an email.
Shares of Coinbase Global Inc. COIN,
Mining company Riot Blockchain Inc. RIOT,
Overstock.com Inc. OSTK,
Shares of Block Inc. SQ,
PayPal Holdings Inc. PYPL,
Advanced Micro Devices Inc. AMD,
Among crypto funds, ProShares Bitcoin Strategy ETF BITO,
Grayscale Bitcoin Trust GBTC,
The wheels have really come off the wagon of the stock market, but ARK Invest's Cathie Wood still sees deep value in beaten-down names.
Frances Yue covers the cryptocurrency market as a Reporter for MarketWatch.