Bitcoin bounces back above $30,000 as investors absorb fallout from Terra
The price of bitcoin bounced on Friday and wavered over the $30,000 mark, after dropping to 2022 lows earlier in the week, as stocks climbed higher and investors digested the fallout of Terra's UST stablecoin.
Bitcoin last traded 5.3% higher at $30,046.85, according to Coin Metrics. On Thursday it fell as low as $25,401.29, its weakest point since December 2020. Meanwhile, ether gained 6.6% and was trading at $2,063.67.
Bitcoin and ether finished their worst weeks since May 2021, down more than 15% and 22%, respectively. This is bitcoin's seventh down week in a row.
Crypto markets have struggled all year amid the broader market turmoil. Bitcoin, which continues to lead cryptocurrency prices, remains highly correlated with tech stocks, and all three of the major stock averages were higher Friday.
This week has been especially dire for cryptocurrency investors as they watched Terra's UST stablecoin and luna token fall apart, which at least temporarily scared investors and hit bitcoin prices.
"We have a lot of near term chaos, this has been just the year of fear, panic and a lot of investors sitting on their hands," Sylvia Jablonski, CEO and CIO of Defiance ETFs told CNBC.
"When you get this news now about Terra and the sister coin, luna, crashing, that just creates this absolute wall of worry," she added, "and you have the combination of the Fed and relentless market volatility coupled with a loss of confidence in crypto – a lot of investors start to run for the hills."
By Friday, however, bitcoin was back to behaving like an equity, she added.
Yuya Hasegawa, a crypto market analyst at Japanese bitcoin exchange Bitbank, said bitcoin bounced because it passed "the worst part of the week" – inflation data.
Cryptocurrencies fell with stocks this week after the Bureau of Labor Statistics reported consumer prices for the month of April jumped 8.3%, which was slightly higher than expected by economists polled by Dow Jones.
"The market glimpsed a little bit of hope this week that inflation may have hit the ceiling, and it did it without the effect of the monetary tightening that the Fed decided earlier this month," Hasegawa said.
$30,000 is a key psychological level for investors, as many are experiencing their first big crypto crash. Until it began to tumble this month, the largest cryptocurrency by market cap had been drifting between about $38,000 and $45,000 this year, well off its November all-time high of $68,982.20.
Technical analysts have said if bitcoin can't hold $30,000 it could fall further still. Hasegawa said bitcoin could soon reverse higher.
"Although the market still needs to fully digest the whole TerraUSD panic, which could be accompanied by capitulation, bitcoin is nearing its bottom in terms of the timing," he said.