The cryptocurrency was stable on Friday, with Bitcoin recovering from a 16-month low after a turbulent week in Terra USD, due to the depreciation of the so-called stablecoin.
Concerns over high inflation and rising interest rates have boosted the sale of cryptocurrencies in a wide range of risky investments, but are beginning to show signs of recovery.
Although the near-term trends in the crypto market are challenging to predict, the worst could end, said Juan Perez, trading director at Monex USA in Washington.
“Perhaps now that all the obstacles to global growth and financial austerity are clear, we will probably start to hang on to the top,” he said.
Bitcoin, the largest cryptocurrency in terms of market value, recently rose 4.85% to $ 29,925, the lowest since December 2020 at 25 25,400, which hit Thursday.
While it peaked at just under $ 31,000 on Friday, Bitcoin remained well below its previous week’s level of about $ 40,000 and is on track for a record seventh weekly loss if not a huge rally over the weekend.
Steffel’s chief equity strategist Barry Bannister says Bitcoin still has a worse side at about 15 15,000.
“Bitcoin is also GDP-sensitive, as Bitcoin falls as the PMI manufacturing index declines, as we expect (in the third quarter of 2022), indicating that the last, capitalist bitcoin drop may still be ahead,” he added.
Ether also gained the second largest cryptocurrency in terms of market cap, rising 6.48% to 0 2,051.
Tether, the largest stablecoin whose developers say is backed by dollar wealth, returned to $ 1 after falling 95 cents on Thursday.
TerraUsD, however, the stable coin that is supposed to be against the dollar, continues to decline by 14 cents, according to data tracker Koenzeco. It has been de-pegged to the U.S. currency since May 9th.
The overall market capitalization of the crypto sector rose 6.6% to $ 1.35 trillion on Friday, CoinGecko data showed.
Larger financial markets have so far seen little knock-on effect from the cryptocurrency crash. Rating agency Fitch said in a note on Thursday that weak links to regulated financial markets would limit the likelihood of crypto market volatility due to widespread financial instability.
“Crypto is still infinitely smaller than crypto integration into smaller and larger financial markets,” said James Malcolm, head of UBS’s FX strategy.
Crypto-related stocks have taken a pound with the market crashing, but on Friday, the broker coinbase rose 16% to $ 67.87, although it is still 28% lower in the week.
The global market value of the cryptocurrency sold since November has almost halved, but the downturn has turned panic in recent sessions with pressure on stablecoin.
Stablecoins are traditional asset value tokens, often in US dollars, and the main means of transferring money between cryptocurrencies or converting fiat cash balances.
The fall of Terra USD (UST) has pushed cryptocurrency markets this week, breaking its 1: 1 peg to the dollar.
The complex currency stabilization process, which balances with a free-floating cryptocurrency called Luna, stops working when Luna sinks near zero.
“For this type of stablecoin, the market needs to believe that the issuer has sufficient liquid assets that they will be able to sell in times of market pressure,” analysts at Morgan Stanley said in a research note.
Tether, another stablecoin operating company, said it had the necessary assets in treasury, cash, corporate bonds and other money-market products.
But stablecoins could face further testing if traders continue to sell, and analysts worry that further liquidation could put pressure on money markets.
Fitch said cryptocurrency and digital finance could face “significant negative feedback” if investors lose confidence in stablecoin, as many regulated financial institutions have increased their exposure to the sector in recent months.