Bitcoin trades below US$30,000 as markets digest TerraUSD fallout

Bitcoin trades below US$30,000 as markets digest TerraUSD fallout
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LONDON (May 15): Bitcoin staged a modest recovery to trade just below US$30,000, extending a period of relative market calm after the collapse of a closely watched stablecoin roiled digital assets in the past week.

The largest cryptocurrency advanced 1.1% to US$29,670 at 10.40am in London. Ether, the second-biggest token, rose 1.9% while coins like Avalanche and Cardano posted larger gains.

Bitcoin dipped to a low of US$25,425 on Thursday after the TerraUSD algorithmic stablecoin unravelled, throwing the entire ecoystem that supports it into disarray. At its height, the market panic engulfed the US$76 billion stablecoin Tether, a key cog in crypto assets that briefly dipped from its dollar peg.

"We have witnessed the rapid decline of a major project, which sent ripples across the industry, but also a new found resiliency in the market that did not exist during the last market downswing," Changpeng Zhao, chief executive officer of crypto exchange Binance Holdings Ltd, tweeted on Sunday.

Even after Sunday's recovery, the total market value of cryptocurrencies has dropped by about US$350 billion in the past week to roughly US$1.35 trillion, according to data from CoinGecko. Bitcoin is almost 60% off its November all-time high.

While crypto markets may have digested the worst of the TerraUSD fallout, the asset class faces other challenges — most notably, rising global interest rates and tighter liquidity conditions. Federal Reserve chair Jerome Powell last week reaffirmed that the central bank would likely raise interest rates by a half-point at its next two meetings.

"I remain long-term bullish, especially on Bitcoin," said Vasja Zupan, president of cryptocurrency exchange Matrix. "But I do foresee high volatility for some time followed by a period of much lower volumes at lower prices before we can expect trending to new all-time highs."