The price of bitcoin dropped below $30,000 in trading today, its lowest price since July 2021, as investors sold the cryptocurrency amid a broader fall in equity markets.
While it’s easy to pay attention to the drop in bitcoin alone, the Dow Jones Industrial Average lost over 1,000 points on Thursday and the Nasdaq dropped 5% – one of the biggest single-day falls since 2000. Both fell further on Friday and again today, with the Dow Monday dropping 653 points and the Nasdaq down 4.29%. Similar drops have been seen on international markets that have resulted in some investors turning away from speculative markets – the investor version of seeking a safe harbor during a storm.
Broader concerns over the macroeconomic outlook as the Federal Reserve continues to increase interest rates amind 40-year high inflation has been one main driver of equity markets. “In light of fears of rising inflation, most investors have taken a risk-off approach – selling stocks and cryptos alike in order to cut down risk,” said Darshan Bathija, chief executive of Singapore-based crypto exchange Vauld, told Bloomberg.
However, with bitcoin and other cryptocurrencies, there’s often more at play and this cycle is no different.
Spooking cryptocurrency investors today has been an issue with TerraUSD, a stablecoin that is described as the backbone of the crypto economy. UST lost its $1 peg over the weekend, the first time it has been down after having a previously publicized build-out of its bitcoin reserves.
CoinDesk reports that the “depegging” of UST resulted in a series of major withdrawals from Anchor Protocol, a popular leaning market that offers high yield to holders of UST. The flow-on effect was then felt in other cryptocurrencies through the amounts of cryptocurrency being exchanged.
Do Kwon, the founder of Terraform Labs, blamed “anons” for circulating fud – fear, uncertainty and doubt.”
I’m up – amusing morning
Anon, you could listen to CT influensooors about UST depegging for the 69th time
Or you could remember they’re all now poor, and go for a run instead
— Do Kwon 🌕 (@stablekwon) May 7, 2022
The other factor at play is the so-called Bitcoin Fear and Green Index, a measurement of investor sentiment around bitcoin. According to Forbes, the index collects data from social media posts, surveys, volatility and trading volume and has fallen into “extreme fear” territory – a strong concern that prices may continue going down.
After dropping to a low of $29.892 as of 8:31 p.m. EDT, bitcoin had recovered slightly and was trading at $30,838 as of 10:12 p.m. EDT.