Bitcoin tumbles below $30,000 as negative sentiment spreads in wake of UST de-peg

Bitcoin (BTC) is trading below $30,000 on Thursday amid a broader market downturn that’s been led by the troubled Terra ecosystem.

As of Thursday morning, bitcoin was trading at $27,665 dollars, down from $32,056 just 24 hours previously, according to Coinbase data via TradingView. Thursday’s losses mean that bitcoin is down just over 30% in the past week from $39,486 on May 5. 

This has seen bitcoin fall to its lowest levels in 18 months, when it last traded around $27,000 on December 21, 2020.

The contagion from the Terra ecosystem breaking down has spread across the whole crypto market. The price of ether (ETH) has plunged below $2,000 this week, trading at $1,878 according to Coinbase data via TradingView — down 23% in 24 hours. 

Other coins have also felt the pressure as the market compresses, with solana (SOL) trading down at $43.58 after trading above $50 since August 2021. Avalanche (AVAX) is also trading significantly lower at $28.24, down from $40.50 on Wednesday

The crypto market has been in tumult over the past few days as investors digest the ongoing issues with the Terra blockchain.

Terra’s ecosystem has come under pressure after its stablecoin, terraUSD (UST), lost its peg against the dollar. Due to the close relationship between terraUSD and luna (LUNA), Terraform labs’ other offering, both have plunged in price. 

Luna is used to maintain the price of terraUSD through a burn mechanism, meaning that terraUSD is burnt when the price drops below its $1 peg. This creates more luna and while terraUSD remains below the peg and this mechanic persists, luna’s supply grows exponentially.

As a result luna hit new lows on Thursday, trading at $0.04 at the time of writing, according to Binance data. It’s now down 99% in just 24 hours.

Stablecoins have also come under pressure after the UST de-pegging, as tether (USDT) slipped below $0.96 earlier in the day on Thursday.

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