On Friday, cryptocurrencies stabilized, bitcoin recovered from a 16-month low after an unstable week dominated by the collapse of the value of TerraUSD, the so-called stablecoin.

Crypto-assets have been hit by extensive sales of risky investments due to fears of high inflation and rising interest rates, but have begun to show signs of settlement.

Although the near trajectory of the crypto market is difficult to predict, the worst could be over, said Juan Perez, director of trade for Monex USA in Washington.

“Perhaps now that all the obstacles to global growth along with the tightening of monetary policy are clear, perhaps we will start to see fluctuations up,” he said.

Bitcoin, the largest cryptocurrency at market value, last rose 4.85% to $ 29,925, rebounding from its December 2020 low of $ 25,400, which reached Thursday.

Although it hit a low of just under $ 31,000 on Friday, bitcoin remains well below weekly levels of around $ 40,000, and unless a huge weekend rally takes place, it is on track for a record seventh straight loss .

Stifel’s chief capital strategist Barry Bennister said bitcoin still has a further deficit of up to about $ 15,000.

“Bitcoin is also sensitive to GDP because bitcoin falls when the PMI Manufacturing index falls as we expect (in the third quarter of 2022), suggesting that the latest capitulation fall in bitcoin may still be ahead,” he added.

Ether, the second-largest cryptocurrency by market capitalization, also rose, rising 6.48% to $ 2,051.

Tether, the largest stablecoin, whose developers are backed by dollar assets, returned $ 1 after falling to 95 cents on Thursday.

However, the TercoUSD stablecoin, which is also allegedly pegged to the dollar, continued to fall in price by 14 cents, according to data tracker CoinGecko. It has not been pegged to the US currency since May 9.

The total market capitalization of the crypto sector rose 6.6% on Friday to $ 1.35 trillion, CoinGecko data showed.

Broader financial markets are still not experiencing a small effect from the collapse of cryptocurrencies. Fitch said in a note Thursday that weak links with regulated financial markets would limit the potential for cryptocurrency volatility to cause greater financial instability.

“Crypto is still tiny, and crypto-integration in broad financial markets is still infinitesimally small,” said James Malcolm, head of currency strategy at UBS.

FOR BITCOIN

Shares related to cryptocurrency rose as a result of the market crash, but on Friday broker Coinbase (COIN.O) rose 16% to $ 67.87, although it still fell 28% for the week.

Sales have roughly halved the global market value of cryptocurrencies since November, but the drawdown has turned into panic in recent sessions with the compression of stablecoins.

Stablecoins are tokens pegged to the value of traditional assets, often the US dollar, and are the primary means of moving money between cryptocurrencies or to converting balance sheets into fiat cash.

Cryptocurrency markets this week were shaken by the collapse of TerraUSD (UST), which broke the 1: 1 peg to the dollar.

The complex stability mechanism of the coin, which involved balancing with a free-floating cryptocurrency called Luna, stopped working when Luna dropped close to zero.

“For these types of stablecoins, the market must believe that the issuer has enough liquid assets that they will be able to sell during times of market stress,” Morgan Stanley analysts said in a research note.

Another stablecoin company called Tether said it has the necessary assets in treasury bonds, cash, corporate bonds and other money market products.

But stablecoins are likely to face additional challenges if traders continue to sell, and analysts are concerned that stress could spill over into money markets if there is more and more liquidation.

Fitch said cryptocurrencies and digital finance could face “significant negative consequences” if investors lose confidence in stablecoins as many regulated financial institutions have increased in the sector in recent months.

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