Bitcoin collapsed 9.5% on Monday and dipped temporarily below $30K in early trading on Tuesday, stabilising at $31.3K. Ethereum has lost 3.9% in the past 24 hours, while other leading altcoins in the top 10 have fallen from 8.7% (Solana, Cardano) to 12% (Avalanche).
Bitcoin's dominance index rose 0.3% to 41.8% on more altcoin weakness
Total crypto market capitalisation, according to CoinMarketCap, fell 7% overnight to $1.44 trillion. Bitcoin's dominance index rose 0.3% to 41.8% on more altcoin weakness.
Terra and TerraUSD continue to lose ground
The cryptocurrency Fear and Greed Index was down 1 point to 10 by Tuesday and remains in a state of "extreme fear", touching a low point for the seventh time in the past year. An even higher level of fear in the last four years that we have only seen in March 2020 and September 2019.
The current plunge is a retouch of the lows made in January and July last year for the first cryptocurrency
Terra and TerraUSD continue to lose ground. Against this backdrop, the Luna Foundation Guard (LFG) has committed $1.5bn to protect the "stability of UST and the Terra ecosystem as a whole". Stablecoin UST, designed to be as close to the value of the USD as possible, lost more than 30% at one point overnight. But at the time of writing, it is trading at a 14% discount to the US currency.
The current plunge is a retouch of the lows made in January and July last year for the first cryptocurrency. This could look like a last line of defence for the bulls, who may try to push back from the lower end of the trading range since early January.
However, many markets are on a similar informal frontier separating a correction from a potential collapse, so the situation in the crypto market could largely determine sentiment in the deeper debt and equity markets.
As we can see, Ether and Bitcoin remain resilient and robust enough to make them somewhat of a safe harbour within the stormy crypto sea
Judging by the dynamics of Stablecoin, the crypto market is undergoing one of its most massive tests of the entire market periphery, which could determine the credibility of the crypto market for many months or years to come. As we can see, Ether and Bitcoin remain resilient and robust enough to make them somewhat of a safe harbour within the stormy crypto sea.
At the same time, the collapse in quotations has not yet affected miners' confidence in the cryptocurrency's future, as the BTC network's hash rate continues to grow.
Ray Dalio, the founder of Bridgewater Associates, one of the biggest hedge funds, said that bitcoin should be in investors' portfolios. Still, the cryptocurrency itself is not a good competitor to gold in terms of inflation protection. But that could change in the next five to 10 years.