Cryptocurrency prices have recovered slightly, having suffered a further crash earlier this week.
However, Bitcoin’s value is still less than half of its record high of 2021, while Luna is valued at less than a cent after its dramatic collapse.
Bitcoin and Ethereum are both up about 7 percent in the past 24 hours.
Other coins made even bigger gains – XRP grew by 19 percent, Solana by 17 percent and Cardano by 21 percent.
Shiba Inu and Polkadot were among the biggest winners, with growth of 29 and 38 percent, respectively.
The growth will give some hope to crypto investors after a turbulent week, and a rough start to 2022 in general.
What are the current crypto prices?
Here are the prices of the major currencies as of Friday afternoon:
- Bitcoin – $30,700 (£25,200)
- Ethereum – $2,120 (£1,740)
- XRP – $0.45 (£0.37)
- Solana – $55.10 (£45.20)
- Crypto.com – $0.20 (£0.16)
- Cardano – $0.58 (£0.48)
- Avalanche – $37.20 (£30.50)
- Polkadot – $11.70 (£9.60)
- Dogecoin – $0.094 (£0.077)
- Luna – $0.0014 (£0.0011)
- Shaina Inoue – $0.000014 (£0.00000011)
Why did the cryptocurrency crash?
Cool the mood around cryptocurrencies.
It seems that investors are turning away from cryptocurrencies and moving towards less risky investments in the face of global inflation.
The crash is also linked to the collapse of terraUSD (UST) after losing its peg to the dollar, which also wiped out Luna, the support currency.
Shares on Coinbase, the largest US cryptocurrency exchange, fell 15.6 percent overnight on Tuesday after posting a net loss of $430 million (£348 million), much worse than analysts had expected.
Coinbase referred to the “low trend in crypto-asset prices and volatility that began in late 2021,” but quickly indicated that it does not expect these conditions to be “permanent.”
The news raised questions about whether the market has reached an expected cooling-off period – formerly called “crypto winter” – or a perpetual cold, perhaps the “crypto ice age”.
“The worry now for crypto-asset investors is when the slippage will end,” said Simon Peters, crypto market analyst at trading platform eToro.
“The market is caught in a broader plight of investment markets struggling to set comfortable levels in the wake of rising interest rates designed to quell spiraling inflation across the Western world.”
What happened to Luna?
Luna and TerraUSD (UST) are both native tokens of the Terra Network, a blockchain-based project developed by Terra Labs in South Korea.
CoinDesk explains: “The Terra blockchain is built on the Cosmos SDK; a framework that allows developers to create custom blockchains and build their own decentralized applications on top of Terra for different use cases.
“As of now, the Terra ecosystem has more than 100 of these projects built locally. These include non-fungible tokens (NFTs), Decentralized Finance (DeFi) platforms and 3 web applications.”
The goal of Terra is to be a peer-to-peer electronic cash system.
It aims to do this through the use of “stablecoins”, which are cryptocurrencies pegged to a real currency.
The UST is pegged to the US dollar, which means that the value of one UST is supposed to be approximately the same as the value of the US dollar. Luna plays a vital role in this.
CoinDesk explains: “Instead of relying on reserve assets to maintain their peg, terrestrial treasuries are a computationally stable currency. This involves using a smart contract-based algorithm to keep the price of terrestrial treasuries constant at $1 by burning (permanently destroying) Luna tokens in order to mint (Create) new UST tokens.”
In the Terra ecosystem, users can always exchange the Lina token for UST, and vice versa, at a guaranteed price of $1 – regardless of the market price of any of the tokens at the time.
However, Luna was wracked this week by Terra losing its peg to the dollar, due to fears of a looming interest rate hike by the Federal Reserve.
This lowered its price across the floor.
Leading cryptocurrency exchange Binance temporarily suspended withdrawals on Luna on Wednesday, and on Thursday night, the Terra blockchain was officially suspended.
Terra said she took the step “to prevent referee attacks”.
The currency has the potential to recover, but at present things are very uncertain.
Du Kwon, founder of Terraform Labs, creator of Terra, tweeted on Tuesday: “Close to announcing a US dollar redemption plan. Hold on well.”
He added on Wednesday: “I understand that the past 72 hours have been very difficult for all of you – know that I am determined to work with each and every one of you to get through this crisis, and we will build our way out of this.
“The Terra ecosystem is one of the most vibrant in the crypto industry, with hundreds of excited teams building a class that defines applications within… Terra’s return to form will be a sight to behold.”
investment advice site cubic investment He speculated that there was a “good chance” that the cryptocurrency would recover.
Analyst Kelvin Maina wrote: “For Luna to recover, they will need to address the issue and clearly show that such a drop will not happen again. As an analyst, I expect to see Luna prices rise after the floor tanks are pegged to the dollar. I also expect prices to start rebounding after it showed Project Terra that similar problems will not occur in the future.”
Members of Luna’s dedicated forum are lamenting their losses on Reddit. A subreddit is a string or subcategory within a Reddit website.
One wrote: “I lost more than 450 thousand dollars, and I cannot pay the bank,” while others mentioned the possibility of losing their homes.
Will cryptocurrency recover?
Cryptocurrencies are showing signs of recovery, with the help of Bitcoin once again rising above the $30,000 threshold.
One factor that could provide hope for cryptocurrency investors is that big players are starting to join the party.
On Wall Street, JPMorgan Chase, Morgan Stanley, and Goldman Sachs are among the companies with dedicated cryptocurrency teams. Meanwhile, mainstream hedge funds, run by the likes of Alan Howard and Paul Tudor Jones, are pumping billions into digital currencies.
Some of the provisions in the Queen’s speech are intended to target those using crypto assets to conduct fraud, but little has been said about how to protect individuals who choose to invest in them.
Swinging from the regulatory hammer could slide cryptocurrencies even further, while quick decisions could preserve whatever inherent value is present.
Brian Nick, chief investment strategist at Novin Bloomberg: “What gets punished if financial conditions tighten? Anything with a high valuation and uncertain or non-existent revenue streams,
“And crypto has indisputably high valuations and there is no revenue stream. That is a big part of what we see in growth stocks, technology. It is related but obviously more volatile because the market is less liquid.”
How dangerous is cryptocurrency?
People invest at their own risk and cryptocurrencies are not regulated by the British financial authorities.
All cryptocurrency investments are risky, but meme coins like Shiba Inu are especially volatile, and you should be prepared to lose whatever you invest.
The Financial Conduct Authority (FCA) warned in January: “Investing in crypto-assets, or investments and related lending, generally involves an extremely high risk of investor money.
“If consumers invest in these types of products, they should be prepared to lose all of their money.”
Susanna Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown previously outlined the risks he faces me.
“In addition to being highly volatile, most cryptocurrencies are unregulated, which not only adds another layer of uncertainty, but also means that investors have little or no protection against fraud,” she said.