Cryptocurrency investors received a rude awakening of epic proportions on the morning of Thursday, May 12, as Terra Luna haemorrhaged value. The Stablecoin-backed token fell from $18.84 (£15.39) on May 11 to $0.3167 (£0.26) by 7am the next morning and the momentum has toppled it further to $0.0001216 (£0.000099) as of May 13. Market movements have led some to believe the cryptocurrency bubble has burst similarly to the dot-com crisis of the late 1990s.
Has the cryptocurrency bubble burst?
LUNA’s collapse has lost investors billions of dollars collectively, with people complaining that the crash evaporated their savings and left their homes hanging in the balance.
The trouble for Terra Luna came just days after the currency decoupled from USD but has had a negligible impact on other, more established tokens such as Ethereum and Bitcoin.
BTC currently sells for roughly $29,776 (£24,325.50), an increase of 3.66 percent on May 12, and ETH is up 5.5 percent to $2,063 (£1,685.37).
But while they have escaped the immediate fallout from LUNA, the coins’ overall performance is trending down.
Bitcoin and many of its competitors on the crypto market have had their values decimated.
In 2021, investors could pick up a single token for around $67,000 (£54,735.65), making its current price a $39,000 (£31,861) loss.
The same goes for Ethereum, worth $4,812 (£3,931) apiece in November 2021.
Compared to now, the token has lost more than half of its overall value in just six months.
Although comparatively poor, neither coin’s performances constitute a full-on crash.
A market-wide crash would only occur if the majority of tokens suffered LUNA’s fate simultaneously.
In reality, both top performers are still far more valuable now than when they were when they first entered the scene.
Tammy Da Costa, a market analyst at DailyFX.com, outlined the other destabilising influences on the cryptocurrency market.
She said: “A major concern is that many retail traders have invested in Bitcoin and cryptos in an effort to receive higher returns in a low-interest-rate environment.
“Now, as price pressures mount and the cost of living continues to soar, further declines in investments and in the ability for consumers to spare excess capital could continue to weigh on the crypto market.”
Ms Da Costa said the activity raised fears that a “systemic shock” might follow if “large institutions continue to withdraw funds from their crypto portfolios”.
The information in this article does not equate to financial advice. Anyone considering investing in cryptocurrency should understand the risks involved.
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