Bitcoin plunged below $26,000 for the first time in 16 months, amid a dramatic sell-off in cryptocurrencies that erased more than $200 billion from the entire market in a single day.
The price of bitcoin fell as low as $25,401.29 on Thursday, according to Coin Metrics. This is the first time the cryptocurrency has slipped below the $27,000 level since Dec. 26, 2020. Bitcoin has since deleted some losses and was last trading at $28,569.25, down 2.9%.
Meanwhile, Ether, the second-largest cryptocurrency, fell as low as $1,704.05 per coin. This marks the first time the token has plummeted below the $2,000 mark since June 2021. Ether was last down 8.8% at $1,937.88.
Investors started selling cryptocurrencies at a time when stock markets have slumped from the highs of the coronavirus pandemic on fears over increasing prices and a deteriorating economic outlook. U.S. inflation data out Wednesday showed prices for goods and services jumping 8.3% in April, higher than expected by analysts and close to the highest level in 40 years.
Another dramatic price crash happened with the stablecoin protocol Terra. UST is supposed to mirror the value of the dollar. However, the pegged currency plunged below 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.
Stablecoins are the crypto version of bank accounts. Digital tokens’ investors rely on them for safety in times of volatility in the markets. Nonetheless, UST, an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve, has struggled to maintain a stable value as holders bolted for the exits en masse.
On Thursday, UST was trading at about 41 cents, still well below its intended $1 peg. Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, erased 99% of its value and was last worth just 4 cents.