Cryptocurrencies stabilise, bitcoin rallies after stablecoin collapse

business-standard.com:

Cryptocurrencies steadied on Friday, with bitcoin recovering from a 16-month low after a volatile week dominated by the collapse in value of TerraUSD, a so-called stablecoin.

Crypto assets have been swept up in broad selling of risky investments on worries about high inflation and rising interest rates. But broader financial markets have so far seen little knock-on effect from the cryptocurrency crash. "Crypto is still tiny and crypto integration within broader financial markets is still infinitesimally small," said James Malcolm, head of FX strategy at UBS.

Ratings agency Fitch said in a note on Thursday that weak links to regulated financial markets will limit the potential of crypto market volatility to cause wider financial instability.

Bitcoin, the largest cryptocurrency by market value, rose 3.5% to $29,884, rebounding from a December 2020-low of $25,400 which it hit on Thursday. But despite hitting a high of just under $31,000 on Friday, bitcoin remains far below week-earlier levels of around $40,000 and unless there is a huge weekend rally it is on track for a record seventh consecutive weekly loss.

Stifel chief equity strategist Barry Bannister said bitcoin still has further downside to about $15,000. "Bitcoin is also GDP-sensitive, because bitcoin falls when the PMI Manufacturing index drops, as we expect (into the third quarter of 2022), indicating that a last, capitulatory bitcoin drop may be still ahead," he added.

Ether, the second largest cryptocurrency in terms of market cap, also gained, climbing 5.8% to $2,068. Tether, the biggest stablecoin whose developers say is backed by dollar assets, was back at $1, after falling to 95 cents on Thursday.

TerraUSD, however, the stablecoin that is also supposedly