Panic due to a massive crash in the cryptocurrency market

The digital currency Bitcoin recorded a rebound, Friday, as it jumped above $30,000 despite the ongoing collapse of the “TerraUSD” coin that caused panic in the crypto market, causing it to lose half of its assets.

The world’s largest cryptocurrency was trading at about $30,262.85 at 4 a.m. ET (8 a.m. GMT), Friday, according to CoinGeco data and reported by CNBC, an 8 percent increase in the Last 24 hours after dropping to levels not seen since late 2020 earlier this week.

However, the digital currency is still down 16 percent in the past seven days.

The cryptocurrency world went into a complete meltdown this week in a sell-off that graphically illustrated the dangers of experimental and unregulated digital currencies. Even as celebrities like Kim Kardashian and tech moguls like Elon Musk talk about cryptocurrencies, the accelerating decline of currencies like Bitcoin and Ethereum, any two-year financial gain could disappear overnight, according to the New York Times.

“Perfect Storm”

The virtual market’s massive slump came due to the collapse of a controversial stablecoin known as “Terra USD”, which is supposed to be stable at one US dollar, reaching its value of 14 cents.

As a result, the Luna coin, which is closely related to the Terra USD, is now worth $0, after it was over $82 a week ago.

Tether, the largest stablecoin that developers say is backed by dollar assets, was also under pressure and fell to 95 cents on Thursday, according to CoinMarketCap data, but returned at $1 on Friday.

The sale has nearly halved the global market capitalization of cryptocurrencies since November, but the decline has turned into a panic in recent sessions with pressure on stablecoins.

These are tokens tied to the value of traditional assets, often in US dollars, and are the main means of transferring funds between cryptocurrencies or converting balances into traditional fiat money.

The moment of panic has reached the worst reset in cryptocurrencies since bitcoin’s 80 percent drop in 2018. But this time, the price drop had a broader impact as more people and institutions held the coins.

Critics said the crash was long overdue, while some analysts compared the warning and fear to the onset of the 2008 financial crisis.

“This is like the perfect storm,” Dan Dolev, an analyst who covers crypto and financial technology companies at Mizuho Group, told the New York Times.