Connect with us

Forex

Crypto meltdown deepens as stablecoin Tether drops below dollar peg

Published

on


© Reuters. FILE PHOTO: A representation of cryptocurrency Bitcoin is seen in this illustration taken August 6, 2021. REUTERS/Dado Ruvic

By Alun John, Elizabeth Howcroft and Samuel Indyk

HONG KONG / LONDON (Reuters) -The meltdown in TerraUSD, one of the world’s largest stablecoins, sent shockwaves through cryptocurrency markets on Thursday, pushing another stablecoin Tether below its dollar peg and sending bitcoin to 16-month lows.

Cryptocurrencies have been swept up in a sell-off across higher risk assets, which has picked up steam this week as data showed U.S. inflation running hot, deepening investor fears about the economic impact of aggressive central bank tightening.

The sell-off has taken the combined market value of all cryptocurrencies to $1.12 trillion, around a third of where it was last November, based on data from CoinMarketCap, with more than 35% of that loss coming this week.

Bitcoin, the largest cryptocurrency by market cap, hit a low of $25,401.05 on Thursday, its lowest level since Dec. 28, 2020. In the past eight sessions, it has lost almost a third of its value, or around $13,000, and is down more than 45% so far this year.

Bitcoin is also down nearly two-thirds from a peak of $69,000 in November 2021.

Bitcoin’s correlation with the Nasdaq composite has been on the rise recently and is now up near its all time highest level, based on Refinitiv data. The Nasdaq composite has tumbled around 8% so far this month.

Ether, the world’s second-largest cryptocurrency, fell nearly 15% on Thursday to $1,700, its lowest since June 2021.

Unlike previous financial market sell-offs, when cryptocurrencies have been largely untouched, the selling pressure in these assets this time round has undermined the broader argument that they are dependable stores of value amid market volatility.

NOT-SO-STABLECOINS

Stablecoin TerraUSD has been hit by the turmoil and broke its peg to the U.S. dollar, which led to it falling as low as 31 cents on Wednesday. On Thursday it was trading around 47 cents.

Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar. But TerraUSD is an algorithmic, or “decentralised”, stablecoin, and was supposed to maintain its dollar peg via a complex mechanism which involved swapping it with another free-floating token.

“The collapse of the peg in TerraUSD has had some nasty and predictable spillovers. We have seen broad liquidation in BTC, ETH and most ALT coins,” said Richard Usher, head of OTC trading at BCB Group, referring to other cryptocurrencies.

Even stablecoins backed by traditional assets were showing signs of stress on Thursday.

Tether slipped below its 1:1 dollar peg, hitting as a low of 95 cents around 0724 GMT on Thursday, based on CoinMarketCap data.

“The lack of transparency provided by Tether on the quality of commercial paper they hold to back the peg made it the obvious next target,” said BCB Group’s Usher.

“However, Tether is a very different animal to Terra, with a more proven ecosystem and I have far more confidence that when volatility subsides it can regain its peg and stability,” he said.

Paolo Ardoino, Tether’s chief technology officer, said in a Twitter (NYSE:TWTR) Spaces chat that the stablecoin had reduced its exposure to commercial paper over the last six months and now holds the majority of its reserves in U.S. Treasuries.

Ardoino said a quarterly update on Tether’s reserves would be available later in the month.

Tether, is the largest stablecoin by market cap, and, along with USD Coin and Binance USD, they account for almost 87% of the total $169.5 billion stablecoin market, according to CoinMarketCap.

The large number of centralised cryptocurrency exchanges and decentralised venues, each with their own liquidity profile and credit risk, was adding to price distortions across the market, to Denis Vinokourov, head of research at Corinthian Digital Asset Management, said.

“The spillover effects into other stablecoins is in part driven by the fragmented nature of the market,” Vinokourov said.

“This credit risk, especially during the times of tight liquidity conditions and mass deleveraging leads to further price distortions.”

Market players are still assessing the impact TerraUSD’s troubles on investors.

In its biannual Financial Stability Report on Tuesday, the U.S. Federal Reserve warned that stablecoins are vulnerable to investor runs because they are backed by assets that can lose value or become illiquid in times of market stress.

Forex

Qatar Investment Authority cannot exit Russian market

Published

on


© Reuters. FILE PHOTO: A general view shows oil treatment facilities at Vankorskoye oil field owned by Rosneft north of Krasnoyarsk, Russia, March 25, 2015.

DOHA (Reuters) – The Qatar Investment Authority cannot exit the Russian market and is waiting to assess its position there because of the Ukraine crisis, the sovereign wealth fund’s chief investment officer for Europe, Russia and Turkey said Tuesday.

“We can’t do much in Russia…We have to really assess where to stand on those opportunities there. I think it is a very difficult position for us, being an investor with one name.”

QIA owns a 19% stake in Russian state-backed oil giant Rosneft, which Al-Hammami said is the fund’s only holding “of significance” in Russia.

(Reporting and writing by Andrew Mills in Doha, Editing by Louise Heavens)

Continue Reading

Forex

Pound Tumbles as Rate-Hike Bets Cut on Renewed Recession Fears

Published

on


© Reuters. Pound Tumbles as Rate-Hike Bets Cut on Renewed Recession Fears

(Bloomberg) — The pound tumbled and investors rushed to the safety of government bonds after an index of UK private sector growth unexpectedly slid in May to reawaken fears of a recession.

That led traders to rein in bets on further interest-rate hikes from the Bank of England, given the risk that higher borrowing costs will halt growth. The pound fell nearly 1% against the dollar, reversing Monday’s gains and making it the most volatile Group-of-10 currency this week.

Traders piled into short-dated government debt, driving down the two-year gilt yield by 12 basis points to 1.45%, its biggest drop in two weeks. Bonds are benefiting as money markets expect about 15 basis points fewer rate increases this year, a day after BOE Governor Andrew Bailey said a cost-of-living crisis will be factored into policy decisions.

“After Governor Bailey’s not-so-hawkish comments yesterday, today’s PMI figures underscore the real income shock on the UK economy,” said Geoffrey Yu, a senior foreign-exchange strategist at Bank of New York Mellon. “If we had to pick one G-10 central bank most likely to pause soon, it would likely be the BOE.”

Read more: UK Faces Risk of Recession as Firms Wilt Under Soaring Costs

S&P Global’s index of private sector growth unexpectedly slumped in May to levels last seen in February 2021, when coronavirus lockdowns were still in place, the firm said Tuesday. The speed of the slowdown was the fourth-largest on record and worse than anything seen before the pandemic hit. 

“These are stunning decreases over such a short period of time,” said Christopher Dembik, head of macro analysis at Saxo Bank, adding that inflation is still “out of control” and a technical recession is likely in the UK this year.

The data gives policy makers bandwidth for just one more 25 basis-point hike at June’s meeting at a maximum, according to Simon Harvey, head of currency analysis at Monex Europe. The BOE has already implemented four back-to-back hikes to deal with surging inflation. 

©2022 Bloomberg L.P.

 

Continue Reading

Forex

Dollar Weakens After Lagarde Props Up Euro; Risk-Off Tone Still Dominant

Published

on


© Reuters.

By Geoffrey Smith

Investing.com — The dollar fell again in morning trade in Europe after European Central Bank President Christine Lagarde chose not to rule out a 50 basis point interest rate hike at the bank’s July meeting.

By 3:30 AM ET (0730 GMT), the euro traded up 0.3% at $1.0724, its highest level in nearly a month. The dollar index, in which the EUR/USD rate has the biggest weighting, was down 0.2% at 101.86.

The greenback has lost its momentum in recent days since the ECB shifted more clearly to signaling what would be its first interest rate hike in a decade at its July meeting, narrowing the distance in policy terms between it and the Federal Reserve.

Lagarde had published a blog on the ECB’s website on Monday, saying that the ECB would be out of negative interest rate territory by the end of the third quarter. While that confirmed a shift toward tightening, the euro had weakened later in the day on perceptions that the timeframe was chosen in order to rule out a 50 basis point hike already in July, which the ECB’s more hawkish policymakers say is necessary.

Talking to Bloomberg on the sidelines of the World Economic Forum in Davos, Lagarde pushed back against such suggestions, saying that nothing was off the table, but repeated that the ECB’s moves should be gradual.

The ECB’s deposit rate currently stands at -0.5%, while its refinancing rate stands at 0%. In the current environment of high excess liquidity, it is the deposit rate that effectively sets a lower bound for market interest rates.

Lagarde was speaking just before the publication of the first of the preliminary purchasing managers indices for May from S&P Global. Both the manufacturing and services PMIs for France came in a little below expectations, but nonetheless, both stayed clearly in the territory signaling growth. Germany’s manufacturing PMI surprisingly managed its first gain in three months.

More broadly, the market tone has shifted back to risk-off after a reassessment of China’s fiscal stimulus announcement on Monday. While markets welcomed the idea of over $20 billion worth of tax rebates for corporates, the overall volume was disappointing for many and still offered no convincing way out of the growth trap created by Beijing’s ‘Zero Covid’ strategy.

The offshore yuan fell 0.4% to 6.6857, after rising sharply in response to Monday’s news.

Elsewhere, the Turkish lira weakened above 16 to the dollar for the first time this year amid ongoing fears about rampant inflation. The country is a big net importer of energy and consequently highly exposed to the leap in oil and gas prices this year. By contrast, the tightly-managed Russian ruble rate continued to go from strength to strength, hitting another four-year high of 56.91 against the dollar.

Continue Reading

News

Stock Markets8 mins ago

Explainer-Ukraine looks for ways to get its grain out

© Reuters. FILE PHOTO: Sergei Yarosh, head of Mlybor (flour mill) enterprise, shows a handful of grains at the facility...

Uncategorized14 mins ago

Explainer-Ukraine looks for ways to get its grain out

Stock Markets14 mins ago

U.S. CDC recommends re-isolation if COVID recurs after taking Pfizer’s pill

© Reuters. FILE PHOTO: Pfizer’s coronavirus disease (COVID-19) pill Paxlovid is packaged in Ascoli, Italy, in this undated image obtained...

Economy14 mins ago

Oh Snap! Social media stocks lose billions after Snapchat parent warning

© Reuters. FILE PHOTO: A woman stands in front of the logo of Snap Inc on the floor of the...

Economy15 mins ago

As Fed amps up inflation fight, one policymaker urges caution

© Reuters. FILE PHOTO: President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks...

Stock Markets15 mins ago

European shares fall as business growth data deepens slowdown worries

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 23,...

Stock Markets15 mins ago

Nio to Invest $32.8M Building R&D Labs in Shanghai

© Reuters Nio (NIO) to Invest $32.8M Building R&D Labs in Shanghai By Michael Elkins A recent report by CnEVPost...

Economy15 mins ago

Stocks slump on growth concerns, bond yields slip

2/2 © Reuters. FILE PHOTO: Men wearing protective face masks walk under an electronic board showing Japan’s Nikkei share average...

Economy15 mins ago

Global macro funds shine in hedge fund industry, proving popular with investors

© Reuters. FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New...

Stock Markets15 mins ago

Shareholders back Shell’s climate strategy after raucous meeting

4/4 © Reuters. A climate activist wearing a face mask depicting Shell’s CEO Ben van Beurden attends a protest outside...

Economy15 mins ago

OECD chief sees global digital tax deal pushed back to 2024

© Reuters. FILE PHOTO: OECD’s incoming Secretary-General and former Australian Finance Minister Mathias Cormann delivers a speech at a handover...

Cryptocurrency38 mins ago

Top 3 cryptocurrencies that are faring the best in the 2022 bear market

Top 3 cryptocurrencies that are faring the best in the 2022 bear market The crypto market has been in decline...

Sports & General38 mins ago

Former White House press secretary to join MSNBC cable network -statement

© Reuters. FILE PHOTO: U.S. White House Press Secretary Jen Psaki holds her last press briefing at the White House...

Stock Markets38 mins ago

Tata Steel says India export tax could alter output targets

© Reuters. FILE PHOTO: A company logo is seen outside the Tata steelworks near Rotherham in Britain, March 30, 2016....

Cryptocurrency44 mins ago

Understanding Tether’s Peg and Reserves and How They Work

Understanding Tether’s Peg and Reserves and How They Work How to maintain Tether’s stability. Tether’s reputation and transparency. Financial reserves...

Cryptocurrency44 mins ago

LTC Social Engagement Jumps 21% After MimbleWimble Activation

LTC Social Engagement Jumps 21% After MimbleWimble Activation The Litecoin community has recently approved the activation of the MimbleWimble protocol...

Uncategorized44 mins ago

Crypto Flipsider News – Bitcoin Drops Below $29k to Mark 8 Week Bearish Streak; Uniswap to Launch on Moonbeam & Gnosis; Binance Debuts Payment and Trading in Dubai; Sumitomo Launches Institutional Cry

World45 mins ago

Trump’s sway faces biggest midterm test in Georgia’s Republican races

4/4 © Reuters. Georgia Governor Brian Kemp waves to the crowd following a rally ahead of the state’s Republican primary,...

Economy45 mins ago

EU summit unlikely to find solution on Russia oil embargo, von der Leyen says

2/2 © Reuters. FILE PHOTO: Models of oil barrels and a pump jack are seen in front of displayed EU...

Stock Markets45 mins ago

Denmark stocks lower at close of trade; OMX Copenhagen 20 down 0.76%

Investing.com – Denmark stocks were lower after the close on Tuesday, as losses in the Personal & Household Goods, Healthcare...

Stock Markets45 mins ago

Ralph Lauren expects margins to grow on resilient luxury demand

© Reuters. FILE PHOTO: A man walks past Ralph Lauren Corp.’s flagship Polo store on Fifth Avenue in New York...

Stock Markets45 mins ago

Billionaire Steyer backs climate tech firm Regrow Ag

© Reuters. FILE PHOTO: An orchard is planted near Teviston, California, U.S., October 22, 2021. REUTERS/Stephanie Keith By Simon Jessop...

Economy45 mins ago

Chanel may limit purchases more in exclusivity drive

© Reuters. FILE PHOTO: The logo of fashion house Chanel is seen on a store in Paris, France, June 18,...

Stock Markets1 hour ago

Kim Kardashian Named Beyond Meat’s First Chief Taste Consultant, Shares Fail to Hold on to Gains

© Reuters. Kim Kardashian Named Beyond Meat’s (BYND) First Chief Taste Consultant, Shares Fail to Hold on to Gains Beyond...

Economy1 hour ago

US Business Activity Softens as Inflation Tempers Demand

(Bloomberg) — US business activity settled back to a four-month low in early May as costs ballooned and high selling...

Stock Markets1 hour ago

Ralph Lauren expects margins to grow as rich customers shrug off inflation

© Reuters. FILE PHOTO: A man walks past Ralph Lauren Corp.’s flagship Polo store on Fifth Avenue in New York...

Cryptocurrency1 hour ago

Game on: Yield Guild Games scholarships on the rise through Q1

Game on: Yield Guild Games scholarships on the rise through Q1 Yield Guild Games (YGG) has released its Community Update...

World1 hour ago

Tedros re-elected as head of World Health Organization

© Reuters. FILE PHOTO: Director-General of the World Health Organization (WHO) Tedros Adhanom Ghebreyesus addresses the 75th World Health Assembly...

Cryptocurrency1 hour ago

Coinbase Wallet Extends Token Swaps With BNB Chain and AVAX

Coinbase Wallet Extends Token Swaps With BNB Chain and AVAX Coinbase (NASDAQ:COIN) wallet adds BNB Chain and AVAX networks. The...

World1 hour ago

U.S. Senate candidate sues over mail-in ballots in Pennsylvania midterms primary

2/2 © Reuters. FILE PHOTO: Republican Party U.S. Senate candidate David McCormick speaks to reporters after voting in the primary...

Trending