The prices of cryptocurrencies rose this Friday, with bitcoin recovering from a 16-month low after a volatile week dominated by the plunge in the value of TerraUSD, one of the so-called “stablecoins”.
Crypto assets have been dragged down by a widespread sell-off in risky assets due to concerns about high inflation and rising interest rates. Sentiment is especially fragile, with reportedly dollar-pegged tokens falling.
Although the short-term trajectory of the cryptocurrency market is difficult to predict, the worst may be over, said Juan Pérez, director of operations at Monex USA in Washington.
“Perhaps now that all the headwinds to global growth along with monetary tightening are clear, we may start to see moves to the upside,” he said.
The bitcointhe largest cryptocurrency by total market value, rebounded 4.85% to $29,925, recovering from Thursday’s 16-month low of around $25,400.
And even though it reached a high of $31,000 on Friday, it is still well below the levels of a week ago, which hovered around $40,000, and unless there is a rally in weekend trading, headed for a seventh consecutive weekly loss.
Stifel’s chief equity strategist Barry Bannister said bitcoin still has further downside to around $15,000.
“Bitcoin is also sensitive to GDP, because bitcoin falls when the manufacturing PMI falls, as we expect (in Q3 2022), indicating that a final drop in bitcoin may still be in the future,” he added.
Ether, the second largest cryptocurrency in terms of market cap, was up 6.48% at $2,051. Tether, the leading stablecoin whose developers say is backed by dollar assets, was back trading at $1, after falling to 95 cents on Thursday.
TerraUSD, another stablecoin that is also reportedly pegged to the dollar, continued to languish at 14 cents, according to data tracker CoinGecko. The cryptocurrency has remained decoupled from the US currency since May 9.
The global market capitalization of the cryptocurrency sector rose 6.6% to $1.35 trillion on Friday, according to data from CoinGecko.
The broader financial markets have so far seen little repercussion from the cryptocurrency crash.
Rating agency Fitch said in a note Thursday that weak ties to regulated financial markets limit the potential for cryptocurrency market volatility to cause broader financial instability.