Bitcoin has lost 15% over the past week, falling below $33,000 for the first time since July 2021.
The market capitalization of the leading cryptocurrency decreased by about 6% yesterday.
BTC was hit by a massive sell-off of risky assets, which also affected tech stocks. Last week, the Dow Jones Industrial Average fell by more than 1,000 points. The NASDAQ dropped by 5% on Thursday in its worst daily performance since 2020.
The slump was triggered by recession fears in the run-up to the expected interest rate hike by the Fed in summer. After raising the interest rate by 50 basis points in May, the US regulator plans more 50 point hikes in June and July. Furthermore, the Federal Reserve is preparing to reduce its $9 trillion balance sheet from June 1.
Speculation about whether BTC could become the crypto market's reserve currency peaked this weekend, when the TerraUSD (UST) stablecoin briefly lost its peg to USD.
Luna Foundation Guard plans to buy $10 billion worth of BTC to maintain the stability of UST. Currently, the organization has reserves of about $3.5 billion.
Do Kwon, the founder of Terraform Labs, claimed TerraUSD lost its peg due to a coordinated attack on the stablecoin. According to Kwon, any claims against Terra's security were "fear, uncertainty and doubt", and that the UST protocol could withstand attacks. The altcoin has re-established its peg to the US dollar by rising to $0.995, according to GlobalBlock's analyst Marcus Sotiriou. Luna Foundation Guard plans to lend $750 million in BTC to trading firms to protect the stablecoin's peg.
Bitcoin is stuck in a downtrend and is hitting new lows, which is a negative sign for the cryptocurrency.
Long-time bitcoin critic Euro Pacific Capital chief economist Peter Schiff warned that if BTC drops below $30,000, it could likely crash below $10,000 as well.
Stocks heavily correlating with BTC, such as Microstrategy and Coinbase, dived by 19% and 15%, respectively.
