HONG KONG: The meltdown in TerraUSD, one of the world’s largest stablecoins, sent shockwaves through cryptocurrency markets on Thursday, pushing ano­ther major stablecoin Tether below its dollar peg and sending bitcoin to 16-month lows.

Cryptocurrencies have been swept up in a sell-off across higher risk assets, which has picked up steam this week as data showed US inflation running hot, deepening investor fears about the economic impact of aggressive central bank tightening.

The sell-off has taken the combined market value of all cryptocurrencies to $1.2 trillion, less than half of where it was last November, based on data from CoinMarketCap.

Bitcoin, the largest cryptocurrency by market cap, hit a low of $25,401.05 on Thursday, its lowest level since Dec. 28, 2020, before recovering slightly later in the session to trade flat on the day by 1600 GMT.

In the past eight sessions it has lost more than a quarter of its value, or around $10,700, and is down 37% so far this year, trading far below the peak of $69,000 it hit in November 2021.

Bitcoin’s correlation with the Nasdaq composite has been on the rise recently and is now up near its all time highest level, based on Refinitiv data. The Nasdaq composite has tumbled around 8% so far this month.

Ether, the world’s second-largest cryptocurrency, fell to its lowest since June 2021, sinking as low as $1,700. Unlike previous financial market sell-offs, when cryptocurrencies have been largely untouched, the selling pressure in these assets this time round has undermined the broader argument that they are dependable stores of value amid market volatility.

Published in Dawn, May 13th, 2022