Not long afterward, the world’s largest cryptocurrency recovered to now trade at around $31,500 at 6:00 AM EST (1000 GMT).
Yesterday marks the first time Bitcoin has traded below $30,000 since July 2021 when it was priced as low as $29,839. The latest drop comes amid a broader selloff in crypto and stock markets. The cryptocurrency market is down almost 10% in the last 24 hours, while the benchmark S&P 500 index is heading towards its lowest mark in more than a year.
New data released by blockchain data provider Glassnode shows that roughly 40% of Bitcoin holders are now underwater on their investments.
That number would be even higher when isolating short-term investors who joined the market in the last six months when Bitcoin touched its November all-time high. Looking at data from the last month only, 15.5% of all Bitcoin wallets have sustained an unrealized loss after Bitcoin dropped to $31,000.
This suggests that Bitcoin’s strong correlation to the technology stocks and Nasdaq challenges claims that BTC serves as a hedge against inflation.
Furthermore, Glassnode data indicates an inflow of “urgent transactions” during the last sell-off. In other words, this time investors were ready to pay higher fees to shorten the transaction times, with the total value of all on-chain transaction fees paid in the last week hitting 3.07 Bitcoin – the largest ever in its dataset.
“The dominance of on-chain transaction fees associated with exchange deposits also signaled urgency,” the report from Glassnode analysts said.
While a drop in Bitcoin price has mostly been triggered by a large selloff in growth stocks, yesterday’s plunge was further exacerbated by a crash of the stablecoin TerraUSD. The fourth-largest stablecoin plunged 40% to break its 1:1 peg to the USD.
Stablecoins refer to digital tokens whose price is pegged to the value of traditional currencies such as the US dollar. Stablecoins are particularly popular safe-haven bets among investors during times of turmoil in cryptocurrency markets and represent a medium of exchange, allowing traders to move their funds around and bet on other crypto assets.
In contrast to other stablecoins that have reserves in traditional currencies, TerraUSD keeps its peg to the dollar balanced using an algorithm that moderates supply and demand in a complicated process that involves another token, Luna.
The total market cryptocurrency cap now sits at 1.43 trillion, over 50% lower compared to the all-time high set in November.
By Senad Karaahmetovic