Bitcoin extended its losses as it fell below $30,000 for the first time since July 2021, putting its decline from a November record high at more than 55 per cent amid a global flight from riskier investments.
The world’s largest digital token fell by as much as 3.1 per cent to $29,992 in Asian trading. Ether fell as much as 3.7 per cent while Solana dropped 8.2 per cent and Avalanche dipped 10.4 per cent.
“We are seeing a slow-motion meltdown, partially because it is mostly been long holders selling” instead of levered liquidations, said Josh Lim, head of derivatives at New York-based broker Genesis Global Trading.
“Now that some corporate treasuries are hovering near their cost basis, markets are waiting and watching to see if shareholders will force some de-risking.”
The decline in cryptocurrency prices comes as tightening monetary policy to combat runaway inflation curbs liquidity, turning investors away from speculative assets across global markets.
Michael Novogratz, the billionaire cryptocurrency investor who leads Galaxy Digital Holdings, said he expects things to become worse before they improve.
“Crypto probably trades correlated to the Nasdaq until we hit a new equilibrium,” Mr Novogratz said on Galaxy’s first-quarter earnings call on Monday.
“My instinct is there is some more damage to be done, and that will trade in a very choppy, volatile and difficult market for at least the next few quarters before people are getting some sense that we are at an equilibrium.”
Do Kwon, the founder of Terraform Labs, which powers the Terra blockchain, is moving to shore up its algorithmic stablecoin after the cryptocurrency lost its peg to the dollar amid the market rout.
Luna Foundation Guard, the association created to support the decentralised token and Terra blockchain, said it will issue loans worth about $1.5 billion in Bitcoin and TerraUSD to strengthen TerraUSD’s peg after it dropped below a $1 on Saturday as cryptocurrency markets continued to decline.
Mr Kwon captured the attention of the cryptocurrency world earlier this year by pledging to buy as much as $10bn in Bitcoin to prop up Terra.
“We are watching carefully to see how the market fares over the next 24 hours,” said Steven Goulden, a senior research analyst at digital asset market maker Cumberland DRW.
This will include an assessment of whether mechanisms being introduced to "increase reliance, such as LFG lending out Bitcoin to OTC [over-the-counter] trading companies, will be enough to hold in times of deep stress or if we need additional stabilisation mechanisms”, he said.
The token’s decline puts it at risk of firmly dropping out of the range where it has been trading in 2022, completely reversing the most recent bull run that drove the token to a record of about $69,000 in November.