Bitcoin (BTC) fell below $30,000 for the first time in ten months on May 10 as turmoil at Blockchain protocol Terra continued.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
Bitcoin price bounces at $29,700
The first trip under the $30,000 mark since July 2021, overnight BTC price performance came amid both declining stock markets and fresh trouble for Terra’s U.S. dollar stablecoin, TerraUSD (UST).
As Cointelegraph continues to report, UST saw an attack involving mass selling this week, which culminated in Terra using its giant 750 million BTC reserves to prop up its USD peg.
Initial liquidity steps to mitigate the impact of the threat proved insufficient, however, and UST subsequently fell to lows of $0.67, according to data from CoinMarketCap.
At the same time, BTC/UST on major exchange Binance began behaving erratically, reaching highs of more than $42,000 while other Bitcoin dollar markets struggled to preserve $30,000.
Which has caused a massive surge in BTCUST (Not Bitcoin valued in dollars, but valued in the UST stablecoin). pic.twitter.com/Xn7qcy4VMZ
– Blockchain Backer (@BCBacker) May 10, 2022
Rumors of a full meltdown at Terra spread rapidly on social media. Nonetheless, the firm’s vocal co-founder, Do Kwon, remained calm after announcing the mass BTC liquidity injection.
Kwon retweeted a summary of the situation from Jose Macedo, Founding Partner at Delphi Ventures, who argued that Terra’s contingency measures would ultimately lead to greater decentralization of the crypto industry’s largest decentralized USD stablecoin.
“Haters will criticise this for centralisation and they’re right, for now. @LFG_Reserve made $UST more robust, but also temporarily more centralised,” he wrote on May 9.
Data from on-chain monitoring resource BitInfoCharts meanwhile confirmed the moves, the wallet balance of Terra nonprofit, the Luna Foundation Guard (LFG), going from 70,000 BTC ($2.23 billion) to 0 BTC.
Luna Foundation Guard (LFG) Bitcoin wallet (screenshot). Source: BitInfoCharts
LFG suggested that not all the previously owned BTC had been sold, and pledged to update the community.
$35,000 on the table
BTC/USD nonetheless managed to recover from its own collapse to trade at near $32,000 at the time of writing on May 10.
Some were even willing to “buy the dip,” among them El Salvador, with President Nayib Bukele confirming the purchase of 500 BTC at an average price of $30,744.
“I don’t know how deep the markets are going to correct, as an additional outlier of the LUNA UST peg is playing it’s part of the drop,” Cointelegraph contributor Michaël van de Poppe reacted overnight.
“All I know, is that the UST peg is a temporary shock and I’m assuming we’ll trade around $35K in the next 24-48 hours for Bitcoin.”
The “shock” had still not resolved at the time of writing, as UST traded at 8% below USD parity. Terra’s LUNA token was at $32 after hemorrhaging over 50% of its value in 24 hours.
LUNA/USD 1-day candle chart (Binance). Source: TradingView
A Twitter survey by popular commentator Benjamin Cowen revealed the majority of over 12,000 respondents believed that the peg would ultimately be restored.
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