Crypto collapse intensifies as stablecoin Tether slides below dollar peg

business-standard.com:

By Elizabeth Howcroft, Gertrude Chavez-Dreyfuss and Hannah Lang

LONDON/NEW YORK (Reuters) - The meltdown in TerraUSD, one of the world's largest stablecoins, rippled through cryptocurrency markets on Thursday, pushing another major stablecoin Tether below its dollar peg and sending bitcoin to 16-month lows.

Cryptocurrencies have been swept up in a sell-off in risk assets, which has picked up steam this week as data showed U.S. inflation running hot, deepening investor fears about the economic impact of aggressive central bank tightening.

The sell-off has taken the combined market value of all cryptocurrencies to $1.2 trillion, less than half of where it was last November, based on data from CoinMarketCap.

Tether, a reserve-backed stablecoin which is supposed to be pegged 1:1 to the U.S. dollar, dropped to as low as 95 cents earlier in the global session, according to CoinMarketCap price data. It was last at 99 cents.

Despite the volatility, U.S. Treasury Secretary Janet Yellen said stablecoins like Tether and TerraUSD do not yet pose a systemic risk to the financial system.

"I wouldn't characterize it at this scale as a real threat to financial stability, but they're growing very rapidly and they present the same kind of risks we have known for centuries in connection to bank runs," she said during a House Financial Services Committee hearing.

Bitcoin, the largest cryptocurrency by market cap, hit a low of $25,401.05 on Thursday, its lowest level since Dec. 28, 2020. It was last down 0.9% at $28,751.

In the past eight sessions, it has lost more than a quarter of its value, or around $10,700, and is down 37% so far this year, trading far below the peak of $69,000 it hit in November 2021.

Bitcoin's correlation with the