Bitcoin (BTC) has plummeted to levels not seen since December 30, 2020, when the main cryptocurrency fell below the $27,000 mark.
Despite regaining momentum to hit $27,769 in intraday trade, the top cryptocurrency continues to struggle due to the Fed’s interest rate hike and the Terra crash.
The Terra network, a blockchain project built by Terra Labs in South Korea, is primarily supported by the TerraUSD (UST) and Luna (LUNA) tokens.
The crypto industry was rocked as LUNA dropped to zero in less than a day.
LUNA was previously one of the most valuable cryptocurrencies, with more than $40 billion in market capitalization. However, according to CoinMarketCap, it had lost 97 percent of its value in the last 24 hours.
Terra’s UST was not spared, falling to $0.225 this week despite being the world’s third-largest stablecoin after Tether (USDT) and USD Coin (USDC). According to market intelligence firm IntoTheBlock, as the stablecoin UST dropped to $0.225 overnight, the number of transactions reached a new high, marking a 13x rise over the previous two days. As a result, investors are selling their UST assets in droves.
Despite rising to $0.63 in intraday trading, UST remains below the predicted $1peg.
As a result of the shockwaves caused by the increased liquidation of UST and LUNA, Bitcoin is still on the receiving end.
Moreover, the leading cryptocurrency faces additional pressure because the Luna Foundation Guard intends to revive UST by selling its BTC reserves worth $3 billion.
Nonetheless, as long as Bitcoin trades in the extreme fear zone, only time will tell how it plays out in the short term, as high anxiety is frequently followed by bullish momentum.