On Thursday, May 12, bitcoin's value fell as low as $25,402.04, down by 10 percent from its value the previous day. This marks the first time bitcoin's value fell below $27,000 since Dec. 26, 2020. The cryptocurrency's value later rebounded to about $29,300. (Related: If Coinbase goes bankrupt, all of its users' funds could disappear.)
The value of bitcoin has continuously fallen over the last seven days up to Wednesday, May 11. This is bitcoin's longest losing streak since March 2020. In the week before its consecutive tanking in value, bitcoin was being traded at around $40,000.
Ethereum, the second largest digital currency, also tanked in value to as low as $1,704.05 per coin. This is the first time ethereum's value has fallen below the $2,000 mark since June 2021.
Perhaps one of the biggest losers in the most recent sell-off in crypto is TerraUSD (UST), a stablecoin.
Stablecoins like UST are cryptocurrencies whose value has been pegged to another cryptocurrency, a fiat currency or to other commodities like precious metals.
UST's value was pegged to $1, but it decoupled from this peg and instantly plummeted in value. On Wednesday, its value fell below 30 cents, shaking investor confidence in the crypto market. It is currently trading at around 40 cents.
Luna, a Tera token that has a floating price and is meant to absorb price shocks felt by UST, had 99 percent of its value erased and is currently trading at less than one cent.
In Nov. 2021, the value of bitcoin peaked at around $69,000. Its current value of $29,300 represents a 57 percent decline from its peak.
Analysts have noted that if bitcoin's value stays below the $30,000 mark and if other cryptocurrencies like ethereum, UST and luna continue to fare poorly, the potential ripple effects throughout the crypto market could accelerate losses and create what the community calls a "crypto winter."
The massive plummeting in the value of cryptocurrencies is occurring at a time when stock markets are also plunging from their record-highs of the past two years.
The latest disappearance of investors from the crypto market came as U.S. inflation data published on May 11 showed prices for goods and services jumping by 8.3 percent in April, higher than what federal government analysts expected and nearing the highest year-over-year inflation level recorded in the past 40 years.
These mass withdrawals from the crypto market are even affecting cryptocurrencies regarded to be far more stable. Tether, the world's biggest stablecoin and also pegged to the value of the U.S. dollar, sank in value. At one point it was being traded at 95 cents per coin. Economists are concerned that tether may not have the required amount of reserves to bolster its value back to its dollar peg in the event of more mass withdrawals.
"The longer this persists, the more this will increase pressure on bitcoin and add to investors' anxiety," noted Michael Safai, managing partner at Dexterity Capital, a quantitative trading firm specializing in cryptocurrencies.
"I don't think the worst is over," said Scottie Siu, an investment director for Axion Global Asset Management, a Hong Kong-based firm that runs a crypto index fund. "I think there is more downside in the coming days. I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that's when I think the market will stabilize."
Watch this episode of the "Waking the Future" podcast as hosts Joel and Patrick talk about how the crash in the cryptocurrency market may be planned.