This breakdown includes details on Bitcoin’s price drop, Terra’s recent troubles, and more in an attempt to answer one big question: Why is crypto crashing, and what will happen next?
The summer may be upon us, but the crypto winter is trying to make a steep return as the market continues to crash this week.
Experts say this dip in the crypto market shouldn’t cause widespread panic, but traders are selling off their assets more than ever. Sadly, not many cryptocurrencies are trading in the green today, according to Coinbase.
Here are the prices for what some cryptocurrencies are trading for as of around 4:30 p.m. ET Wednesday:
- Ethereum is down 10% to $2,092
- Bitcoin is trading at $29,002 per coin
- Binance is one of only three cryptocurrencies trading in the green today.
- Dogecoin took a significant 23% nosedive to $0.0846
- Cardano is down 20% to $0.52
So, why is crypto crashing? What’s really happening in the market, and what’s the actual cause of it all? Volatility may be the short and easy answer, but here’s a breakdown of a few underlying elements at play.
Terra is down 25% today and trading for $0.68. This week, Terra’s algorithmic stablecoin (UST) is the hottest topic in the crypto industry after its foundation made some extensive financial rearrangements.
Terra, the programmable blockchain e-commerce platform powered by algorithmic stablecoins, made a big investment in Bitcoin in March when it purchased a $139 million stake in the coin. Terra’s founder, Do Kwon, tweeted that he’s building a $10 billion Bitcoin reserve to help boost UST’s value, but he seems to be switching up his plans.
Terraform Labs is the parent organization of UST, the LUNA crypto, and Luna Foundation Guard. The organization, which Kwon also leads, liquidated its treasury wallet of all its Bitcoin assets, including 42,530 coins valued at an estimated $1.3 billion. TechCrunch reports that Terraform Labs liquidated its LUNA assets as well.
Kwon said in a tweet that Terraform Labs is “deploying more capital” to help boost Terra’s position in the market right now. He also provided some more insight into the organization’s plans and said he’d share a larger recovery plan soon.
Terra’s price drop is also significant because its stablecoin is supposed to stay as close in value to $1 as possible. When UST falls below this value, its native LUNA token gets burned. LUNA’s price is down 95% to $1.10.
Bitcoin’s Price Drop
Six weeks ago, Bitcoin’s price was in the $47,000 range, but the token’s value is at a great deficit this week. The coin’s current demise could directly result from Terra’s selloff. Traders may be feeling pressure to sell their Bitcoin assets if they think major investors are wiping their hands of the crypto.
Bitcoin’s price has slid 50% in the last six months since its all-time high of $68,000 in November 2021. Today, the crypto coin’s price value is sitting at roughly $29,300, just under the $30,000 mark. Bitcoin is trading at its lowest levels since July 2021, and the token is taking a big hit since it usually trades for above $40,000 per share.
Bitcoin’s price has been tanking more each day this week, yet some investors are staying confident in the token’s bounce-back.
NFT Sales are Also Down
NonFungible’s NFT market tracker shows that NFT sales data is down 92% compared to September last year. While NonFungible’s sales volume data includes mints and transfers, NFT activity is severely down this week in general. At the time of this writing, NonFungible’s tracker reports 28,000 sales, mints, and transfers in the last seven days. Compare that to September when the market saw over 225,000 NFT transactions in a week.
Expect to see more on this in the NFT sales roundup at the end of the week.