Bitcoin and other cryptocurrencies stabilize after multi-day sale

Major cryptocurrencies showed signs of tepid stability on Tuesday after a five-day defeat.

Bitcoin, the world’s largest cryptocurrency by market capitalization, is down 0.4% from the 5 pm ET level on Monday to trade at $3,0959.99. The moderation followed a nearly 22% drop in the cryptocurrency over the previous five trading days — its worst stretch since May 2021, according to market data from Dow Jones. Ether is up about 1.6% from its level on Monday evening.

Cryptocurrencies have fallen closely with the broader stock market in recent days. Investors say the trend for bitcoin and other digital assets to fall alongside stocks is a trend that has become more evident in recent years, as traditional money managers such as hedge funds and family offices have entered the space. These funds may be more likely to sell cryptocurrency holdings during periods of volatility than to hold them.

“This is a double-edged sword,” said Ilan Solot, partner at crypto hedge fund Tagus Capital LLP, “You have a bigger market but on the other hand it is treated like a regular financial asset.” “Stocks crash and when you get stressed, everything starts to correlate .”

US stocks swung between gains and losses on Tuesday, with the S&P 500 and Nasdaq Composite ending higher and the Dow Jones Industrial Average down for the fourth consecutive session. Analysts say stability in the broader stock market may help ease some selling pressure from the cryptocurrency markets.

The recent collapse of the dollar peg in the third largest stablecoin by market capitalization has led to volatility in the cryptocurrency ecosystem. Cryptocurrency TerraUSD, usually pegged to $1, moved lower over the weekend after a series of massive withdrawals from the Anchor Protocol, a type of decentralized bank for crypto investors.

Ether and Bitcoin sales defending the value of TerraUSD impacted the prices of the two largest cryptocurrencies. Investors say a TerraUSD de-peg seems unlikely soon, as many sell orders are still waiting to be processed.

Binance, the world’s largest cryptocurrency exchange by volume, said Tuesday that it has temporarily suspended withdrawals for TerraUSD and Luna tokens – another cryptocurrency used to maintain the TerraUSD peg – due to a large volume of pending withdrawals due to network congestion. These transactions later resumed.

TerraUSD fell to 61 cents in value in the past 24 hours, according to CoinDesk, before rebounding to trade around 90 cents as of 5 p.m. ET on Tuesday. TerraUSD’s sister cryptocurrency Luna traded around $22.54 in the same period on Tuesday, having lost more than half its value 24 hours ago, according to CoinDesk.

Yuya Hasegawa, market analyst at Japanese crypto exchange Bitbank Inc.

Treasury Secretary Janet Yellen on Tuesday reiterated calls for Congress to authorize stablecoin regulation after the TerraUSD rate plunged.

Investors and analysts expect some traders to step in to buy bitcoin and ether at a discount, even if they fall further in the coming days.

On Monday, the President of El Salvador, Neb Bukele, wrote on Twitter that the country bought 500 bitcoins at an average price of $30,744 each. El Salvador, which became the first country to legally tender for bitcoin last year, often adds to its crypto holdings during sales.

The United States quickly became the world leader in bitcoin mining after China cracked down on digital currencies last year. WSJ’s Shelby Holiday takes a look at what it means for the global transformation of the Bitcoin network, the energy industry, and the environment. Photo: Marc Felix/AFP/Getty Images

Write to Elaine Yu at elaine.yu@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

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