Bitcoin and Tether Crash as Crypto Markets Face Growing Pressure

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Major cryptocurrencies faced renewed pressure on Thursday as the industry grappled with new challenges on many fronts.

Bitcoin (BTC-USD), the largest digital coin, slipped 4% below $25,000 on Thursday morning for the first time in the last three months. Other major cryptocurrencies fell, with ether (ETH-USD) and BNB (BNB-USD) falling more than 5% each, while a stablecoin called tether fell below its crucial price of 1 $.

These declines have driven the total market value of all crypto assets to its lowest level since the banking turmoil began in March, according to Coinmarketcap.

Listed crypto companies also fell, including shares of Coinbase Global (COIN). Other crypto stocks including MicroStrategy (MSTR), Riot Platforms (RIOT), and Marathon Digital (MARA) also sold off.

The new price pressures follow assurances from the Federal Reserve that it has not finished raising interest rates this year, as well as reports that crypto lending platforms Delio and Haru have suspended withdrawals after facing increased demands from customers.

Regulators are also mounting pressure on the industry with two new lawsuits filed by the Securities and Exchange Commission last week against crypto exchanges Coinbase and Binance, alleging that 19 specific cryptocurrencies are securities and should therefore be registered with of the SEC.

These tokens – which include BNB, SOL, ADA and MATIC – have fallen 10-14% since the lawsuits.

“Until the regulatory environment is better, cryptos may struggle here,” Oanda market analyst Edward Moya said Thursday.

“The markets are nervous”

The multiple pressure points leave the industry with another problem: lots of sellers and not enough buyers. Large trading companies that might once have acted as market makers have retreated over the past year.

Over the past week, trading volumes have plummeted on Coinbase and Binance. Liquidity is also lower on Binance’s US-affiliated platform, Binance.US. According to Kaiko Research, the amount of money available for trading on Binance’s US-affiliated platform has dropped by 75% following the SEC charges last week.

The story continues

“Everything is falling into place at once and we now have low liquidity in the markets,” crypto investor and entrepreneur Thomas Dunleavy told Yahoo Finance.

Another sign of heightened stress is pressure on Tether (USDT), the largest dollar-pegged stablecoin in the market by market capitalization and trading volume.

It fell 0.20% between Wednesday and Thursday, its biggest one-day drop since November.

At 2:00 a.m. PT on Thursday, the $83 billion stablecoin, which is not supposed to fluctuate below its crucial price of $1, fell to $0.9958. It is issued by a company called Tether.

Markets are jittery these days, so it’s easy for attackers to capitalize on that general sentiment, Tethers CTO Paolo Ardino said on Twitter earlier Thursday.

Tether tokens are backed by other assets the company holds in reserves, including 85% in cash and cash equivalents such as US Treasury bills, 6.5% in collateralized loans and 4% in precious metals according to its report. on reservations from March 31.

When the stablecoin slips below its $1 peg, “verified” market participants can also make a profit by buying the token and trading it for other currencies.

However, in times of heavy selling, the buyback process does not always follow the market.

In May 2022, the so-called algorithmic stablecoin terraUSD crashed after sliding too far below its $1 peg, causing a rapid shift in sentiment that led to the market losing confidence in the coin. leading to its ultimate collapse.

In the month of the terras crash, Tethers Ardino told Yahoo Finance that Tether faced increased drawdowns as investors rushed to liquidate $10 billion in holdings in 11 days.

Although it temporarily slipped as low as 95 cents during the period, it gradually regained its price of $1 over the following weeks.

Today, Ardino took on a defiant tone on Twitter.

We are ready as always. Let them come. We are ready to refund any amount, Ardino said in his tweet.

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