Crypto Crash Sees Investors Stunned By Coins In Freefall

This week the crypto market crashed, causing what Forbes describes as a "1 trillion crypto meltdown." According to the BBC, the domino effect — affecting both stablecoins and cryptocurrencies like Bitcoin and Ethereum — began when the cryptocurrency known as Luna fell from a high of $118 down to $0.09 over the course of a month. The drop is not part of the predictable rises and falls the crypto market has been having since the tail end of 2021. The market has now reached the levels it had before the 2020 surge. Some experts warn that the ripple effect is just getting started while others try to calm the market.

On May 12, according to CoinDesk, Bitcoin registered a low value of $25,463. Since then it has been slowly climbing to the $29,000 mark. The drop is massive compared to the April value that hit a high above $46,000. The top ten coins — including Ethereum, BNB, XRP, Solana, and Cardano — avalanched following the crash. Forbes reports Ethereum lost 22% of its value in just 24 hours.

Non-stable crypto currencies, like Bitcoin and Ethereum, are known for being volatile. But this crypto meltdown is unique, as it seems to have been driven by an unusual factor: the crash of a stablecoin. Barrons reports that the crypto crash was "accelerated by a type of token that's supposed to hold up when everything else tanks." Stablecoins operate on blockchain tech and have been gaining traction in recent years due to their agility, speed, and fixed value, usually set at about $1 per token. Often referred to as the "digital dollars" they have become a go-to asset for people and financial institutions around the world.

The crash of the stablecoin Luna created a panic and took a hard crack at public perception and confidence in the idea of the stablecoin as a concept. Tether, USDT — the largest stablecoin in the market — lost 5% of its value, dropping from $1 to 95 cents. Nicholas Bonnet, a quant at crypto broker Aplo, told CNBC that traders were exploiting the drop in tether, "essentially buying the token for less than $1 and then redeeming it for a dollar."

CNBC reported that Tether Chief Technology Officer, Paolo Ardoino, attempted to calm the market assuring that all tether holders will always receive $1 for their token when they withdraw them. Ardoino added that 300 million tether tokens were withdrawn in 24 hours "without a sweat drop," a symbol of the endurance and resilience of the Tether. The price of other stable coins like the DAI, or USDC, remained level at $1, according to Coinbase.

Financial crypto experts are divided. Some believe the worst is over, others say more drops are coming. Forbes reported that Yuya Hasegawa, a crypto market analyst at Bitbank, believes the price of Bitcoin could still continue falling due to the "UST [Tether] situation and worsening technical sentiment." FX Street reports that bitcoin expert analysts @TheRealPlanC and @decodejar believe the floor price of Bitcoin has already been met, and recovery is on its way.