Bitcoin price plunges below US$30,000. What’s going on?

A bitcoin sits on a graph with red arrow going down

A bitcoin sits on a graph with red arrow going downThe Bitcoin (CRYPTO: BTC) price has fallen below the key psychological level of US$30,00.

At the time of writing Bitcoin is trading for US$29,830, down 4.8% since this time yesterday. Over the past 24 hours, the token traded as low as US$28,170, according to data from CoinMarketCap.

That puts the world’s top crypto by market cap down 25% over the past week and down 40% year-to-date. Crypto investors who bought at the record high Bitcoin price on 10 November will be nursing losses of 57%.

Why are cryptos selling off?

Ordinarily, it’s the Bitcoin price that sets the tone in crypto markets, with most altcoins following in their big siblings’ virtual footsteps.

But that doesn’t appear to be the case with the latest round of selling.

Much of the pressure facing the Bitcoin price looks to be connected to the woes plaguing TerraUSD (CRYPTO: UST). (Details here.)

UST, as you may be aware, is intended to be pegged to the US dollar. But last night the stablecoin was anything by stable, plunging from its intended peg of US$1 to 30 US cents.

That in turn saw Terra (CRYPTO: LUNA) fall by a gut wrenching 97% over the past 24 hours. LUNA is meant to hold the price of UST right at US$1, with investors holding UST able to swap it for US$1 worth of LUNA at any stage.

So, what does this have to do with the Bitcoin price?

Bitcoin price falls amid US$3 billion sale

As if the 3.2% overnight fall in the Nasdaq didn’t throw up enough tailwinds for the Bitcoin price, the world’s original token came under additional pressure from the Luna Foundation Guard. In an effort to revive the UST US dollar peg, the Foundation reported it will sell it US$3 billion of Bitcoin reserves.

According to Jaime Baeza, CEO of crypto hedge fund ANB Investments (quoted by Forbes), “This accelerated the selloff of the broader crypto market as panic spread, and a more black swan systemic-risk event loomed closer.”

Baeza added:

Crypto markets have been under pressure given macro events – tighter monetary policy, surging inflation, Russia’s invasion of Ukraine – and the correlation between Bitcoin and global equities is high. However, the most recent fall in crypto prices is more due to the de-peg of the UST.

With the leading global stablecoin now showing even more volatility than the Bitcoin price, proceed with care.

The post Bitcoin price plunges below US$30,000. What’s going on? appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More reading

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin and Luna. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

from The Motley Fool Australia https://ift.tt/35CE8Xb

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s