Bitcoin and Other Cryptocurrencies Level Out After Multi-Day Selloff

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Major cryptocurrencies showed tepid signs of stability on Tuesday after a five-day rout.

Bitcoin, the world’s largest cryptocurrency by market value, edged down 0.4% from its level at 5 p.m. ET on Monday to trade at $30,959.99. The moderation followed the cryptocurrency’s fall of nearly 22% over the previous five trading days – its worst period since May 2021, according to Dow Jones Market Data. Ether has gained about 1.6% from its Monday night level.

Cryptocurrencies have fallen in step with the broader stock market in recent days. The tendency for bitcoin and other digital assets to fall alongside stocks has become more pronounced in recent years, investors say, as traditional fund managers such as hedge funds and family offices have entered the space. These funds may be more likely to sell crypto holdings during periods of volatility rather than hold them.

“It’s a double-edged sword. You have a larger market, but on the other hand, it’s treated like an ordinary financial asset,” said Ilan Solot, partner at crypto hedge fund Tagus Capital LLP. “Stocks crash and when you’re stressed, everything starts to correlate.”

US stocks oscillated between gains and losses on Tuesday, with the S&P 500 and Nasdaq Composite indices ending higher and the Dow Jones Industrial Average falling for a fourth straight session. The stability of the broader stock market could help ease some selling pressure from cryptocurrency markets, analysts say.

The recent break in the dollar peg in the third-largest stablecoin by market value has also injected volatility into the crypto ecosystem. The TerraUSD cryptocurrency, which is usually pegged to a value of $1, fell below it over the weekend following a series of large withdrawals from Anchor Protocol, a sort of bank decentralized for crypto investors.

Sales of ether and bitcoin to defend the value of TerraUSD also weighed on the prices of the two biggest cryptocurrencies. The $1 TerraUSD decoupling is unlikely to resolve soon, investors say, as many sell orders are still pending processing.

Binance, the world’s largest cryptocurrency exchange by volume, said on Tuesday that it had temporarily suspended withdrawals for TerraUSD and Luna tokens – another cryptocurrency used to keep TerraUSD pegged – due to ‘a high volume of pending withdrawal transactions caused by network congestion. He then took over these transactions.

The value of TerraUSD fell to 61 cents in the past 24 hours, according to CoinDesk, before bouncing back to trade around 90 cents as of 5 p.m. ET on Tuesday. Luna, the sister cryptocurrency of TerraUSD, traded around $22.54 in the same period on Tuesday, after losing more than half of its value over the previous 24 hours, according to CoinDesk.

“The Terra situation has added fuel to the fire,” said Yuya Hasegawa, market analyst at Japanese crypto exchange Bitbank Inc.

Treasury Secretary Janet Yellen on Tuesday reiterated calls for Congress to allow regulation of stablecoins following the TerraUSD price crash.

Investors and analysts expect some traders to step in to buy bitcoin and ether at discounted prices, even if they drop further in the coming days.

Salvadoran President Nayib Bukele wrote on Twitter on Monday that the country bought 500 bitcoins at an average price of $30,744 each. El Salvador, which became the first country to make bitcoin legal tender last year, has often boosted its cryptocurrency holdings in massive sell-offs.

The United States quickly became the world leader in bitcoin mining after China cracked down on the crypto last year. WSJ’s Shelby Holliday examines what global change has meant for the bitcoin network, the energy industry, and the environment. Photo: Mark Felix/Agence France-Presse/Getty Images

Write to Elaine Yu at [email protected] and Caitlin Ostroff at [email protected]

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