Bitcoin trades below $30,000 as markets digest TerraUSD fallout

Bitcoin staged a modest recovery to trade just below $30,000, extending a period of relative market calm following the collapse of a closely watched stablecoin that roiled digital assets over the past week.

The largest cryptocurrency rose 1.1 percent to $29,670 as of 10:40 a.m. in London.

Ether, the second largest token, rose 1.9 percent while coins like Avalanche and Cardano saw larger gains.

Bitcoin fell to a low of $25,425 on Thursday after algorithmic stablecoin TerraUSD unraveled, throwing the entire ecosystem that supports it into disarray.

At its peak, the market panic engulfed $76 billion stablecoin Tether, a key cog in cryptoassets that briefly fell off its dollar peg.

“We have witnessed the rapid demise of a major project that caused ripples across the industry, but also a newfound market resilience that did not exist during the last market downturn,” said Changpeng Zhao, chief executive officer of crypto exchange Binance Holdings Ltd., tweeted on Sunday.

Even after Sunday’s rally, the total market value of cryptocurrencies has fallen by about $350 billion to about $1.35 trillion over the past week, according to data from CoinGecko.

Bitcoin is almost 60 percent off its November all-time high.

While crypto markets may have digested the worst of the TerraUSD fallout, the asset class faces other challenges — most notably rising global interest rates and tighter liquidity conditions.

Federal Reserve Chair Jerome Powell reiterated this week that the central bank is likely to hike interest rates by half a point at its next two meetings.

“I remain bullish on the long-term, especially on bitcoin,” said Vasja Zupan, president of cryptocurrency exchange Matrix.

“But I foresee high volatility for some time, followed by a period of much lower volumes at lower prices before we can expect a trend to new all-time highs.”