TerraUSD plunge spooks crypto market

FIFI PETERS: There has been massive pressure on cryptocurrencies in the past month with Bitcoin, the biggest, plunging from over $40 000 at the start of April to now below $30 000.

To help us understand and make sense of these massive moves that we are seeing in the crypto market, I’m joined by Marius Reitz, the general manager for Africa at Luno, a platform where you can invest in cryptocurrencies.

Marius, thanks for joining the show. We do know that there’s been a selloff in the broader equity market as well. It has not been left unscathed, but it looks like the crypto space is really feeling the rough ride of all the turmoil that is happening right now. Just help us understand what is souring sentiment towards cryptocurrencies.

MARIUS REITZ: Hi Fifi. As you said, I think there are multiple reasons for the drop in prices. First, as you mentioned, the crypto correction is not happening in isolation. The crypto market is experiencing the same pressure as other parts of the global economy, and financial markets are trending down across the board. So I think that’s the first point.

Secondly, I think what caused the market to correct even further was a more technical reason. That is that one of the largest US dollar-backed stablecoins (TerraUSD), which is a cryptocurrency that is backed by a real stable asset – in this case the US dollar – lost its peg to the dollar and traded as low as $0.40 to the dollar at its day.

TerraUSD stablecoin plunges
TerraUSD backers seek $1.5bn to prop up stablecoin

That’s obviously concerning because the stablecoin failed to hold up to its name, really, and the problem that it’s trying to solve; and that is the price volatility in the crypto markets.

So I think that gets a lot of questions around the level of trust that people place in crypto protocols and platforms, and I think it will push the crypto markets down further. The impact of this really is, as you said, the Bitcoin price that’s starting at a…

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