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FEATURE Crypto Weekly
in July 2021 after topping $63,000 in April. Bitcoin would hit its all-time high some four months after that summer low. Crypto history is littered with other examples. Bitcoin neared $18,000 in December 2017 and was below $7,000 by early the following February. Bitcoin's even earlier days hold more cases. A troubling development in the recent crash is the situation with stablecoins, which are widely used tokens pegged to a real asset, usually the dollar. A recent meltdown of the stablecoin Terra (UST) –42.75% has already put downward pressure on Bitcoin, and Tether (USDT) +0.02% —in some ways, the bedrock of the crypto economy, with daily trading volumes more than double those of Bitcoin —is the latest casualty. The price of Tether fell below 96 cents per dollar on Thursday.
The Crypto Crash Offers Opportunities T
he largest digital asset, Bitcoin, fell by more than 25% in the past week due to the cryptocurrency crash. The scale of the selloff is massive, but this isn't the first time cryptocurrencies have experienced extreme volatility. Wall Street is looking for opportunities. During the past 24 hours, Bitcoin fell 11% to $28,000, briefly dipping below $26,000. Last week, the largest crypto was changing hands for around $40,000. Six months ago, it was sitting at its all-time high near $69,000. "While we can't call the bottom, and correlations among asset classes remain elevated, Bitcoin has survived corrections of 70-80% in the past," Martha Reyes, the head of research at digital asset broker and exchange Bequant, said in a note. "This may be an opportunity for institutions to build positions at better levels." The last time Bitcoin saw a crash was last year, when the crypto similarly collapsed by more than 50%. It happened over just three months, with Bitcoin dipping below $30,000
May 2022 | Volume 26
The uncertainty around stablecoins is a concern and may lead to another flush out
Martha Reyes The head of research at digital asset broker and exchange Bequant
Tether and other stablecoins are used by traders as a source of safety in a volatile world. They have become a top medium of exchange for payments, lending, and other activities based on blockchain technology. It is a systemic risk for the crypto ecosystem if stablecoins fail. "The uncertainty around stablecoins is a concern and may lead to another flush out," said Reyes. "But we may finally get the much-needed regulatory framework that could entice institutions." Regulators worry that if stablecoins take off as privately issued digital money, they could pose risks to broader financial markets and monetary policies. A run on a stablecoin could, in theory, lead to heavy selling in assets held as reserves, such as short-term commercial debt or other cash proxies. “The markets are melting, but this may allow institutional players to start building positions and push stablecoin regulation to provide more confidence," said Reyes.
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