Panic in the cryptocurrency market subsides, Tether stabilizes

On Wednesday, the collapse of stablecoin TerraUSD sparked widespread panic in the field of cryptocurrencies. But 24 hours later, things have calmed down significantly.

Terraform Labs has suspended, launched and resumed the Terra blockchain in the wake of the collapse of TerraUSD and Luna.

The developers working on the blockchain tweeted that the second suspension was intended to allow them to “come up with a plan to rebuild” the network. Both TerraUSD, the stablecoin algorithm that lost and did not regain the 1-1 link with the dollars, and the related Luna, were trading close to zero at the time of the second suspension.

But in the rest of the cryptocurrencies the climate had begun to recover. Tether, the largest stablecoin used in cryptocurrency markets to facilitate trading, has recovered from the initial mini-crash, allaying concerns that problems could spread to the wider market.

Cryptocurrencies that support key decentralized financing protocols have also been strengthened. Even ApeCoin recorded a rally, rising more than 35% in 24 hours.

Bitcoin, meanwhile, traded higher at $ 30,000 after falling to $ 25,000 in the previous session. Some alternative currencies also rose, with bitcoin cash rising 20% ​​at some point before losing some of its profits.

This is a much more positive picture than the chaos that hit the cryptocurrency markets on Wednesday, as the UST entered a death spiral. That day bitcoin had fallen 10%.

The fact that Tether is stabilizing means that the margin calls made are weakening. People are still nervous, but sales have dropped. Investors will be nervous for a few more days, but the supply-demand equation has stabilized again, analysts say.

Market watchers noted that bitcoin, which is usually traded in parallel with the stock market, rose again, although the S&P and Nasdaq fell.

Finance Minister Yellen, meanwhile, said the fall of Terra ‘showed the dangers of dollar-linked cryptocurrencies, though she added that their collapse did not pose a threat to financial stability.

“Cryptocurrencies are of little economic importance. Not that many people have a lot of them,” said a Nuveen analyst.

However, he added that the cryptocurrency market is being affected by the same forces that are affecting the stock market at the moment.

“What is punishable when financial conditions get tougher? Anything with a high valuation and uncertain or non-existent revenue stream. And encryption has arguably high valuations and no revenue stream. This is something we see in emerging stocks, in technology. There is a correlation, but it is obviously more volatile because the market is less fluid. ”