Bitcoin once fell below $26,000, and the value of cryptocurrencies evaporated by more than $200 billion in one day

News on May 13, as the price of bitcoin fell below $26,000 for the first time in 16 months, coupled with the intensification of investors’ selling of other cryptocurrencies,Caused the value of global cryptocurrencies to evaporate more than 200 billion US dollars in one day.

According to statistics from blockchain data research firm Coin Metrics, the price of bitcoin plummeted to $25,401.29 on Thursday, local time in the United States.This marks the first time the cryptocurrency has fallen below the $26,000 level since December 26, 2020.

Since then, the price of Bitcoin has rebounded and finally closed at $28,569.25, a decrease of 2.9%.

Meanwhile, the price of the second-largest cryptocurrency, Ethereum, plunged to $1,704.05. This is the first time the cryptocurrency has fallen below the $2,000 mark since June 2021. Ethereum was last down 8.8% at $1,937.88.

Investors are fleeing the cryptocurrency space amid concerns over soaring prices and a deteriorating economic outlook, coupled with stock markets plunging from highs not seen since the COVID-19 pandemic. U.S. inflation data on Wednesday showed that prices for goods and services rose 8.3 percent in April, beating analysts’ expectations and near their highest level in 40 years.

Also worrying for traders is the collapse in the price of the stablecoin TerraUSD, or UST, a cryptocurrency pegged directly to the value of the U.S. dollar. The price of UST plummeted to less than $0.3 on Wednesday, shaking investor confidence in the so-called “decentralized finance sector.”

Stablecoins are like bank accounts in the cryptocurrency space with little regulation. During times of market volatility, cryptocurrency investors often seek safety by buying stablecoins. But in reality, UST is just an “algorithmic” stablecoin based on code, not cash reserves. As holders flee collectively, UST has always struggled to maintain a stable value.

U.S. local time on Thursday, UST traded at around $0.41, still well below its original $1 peg. Another floating-price UST sister cryptocurrency, Luna, also lost 99% of its value and was only worth $0.04.

Investors are concerned about Bitcoin’s massive impact. Luna Foundation Guard, a fund set up by Terra founder Terra creator Do Kwon, has amassed billions of dollars worth of bitcoin to help support UST in times of crisis.

Worryingly, however, the Luna Foundation Guard sold a significant portion of its bitcoin holdings to prop up its ailing stablecoin. It’s a high-risk gamble, especially since Bitcoin itself is an extremely volatile asset.

The fallout from Terra’s debacle has sparked greater concerns. The world’s largest stablecoin, Tether, also fell below its $1 peg on Thursday, falling as low as $0.95 at one point. Economists have long feared that Tether may not have the reserves it needs to back its dollar-pegged exchange rate regime amid a mass withdrawal of investors.