It's an all-round sea of red for almost everything in criptocurrency, with altcoins such as Ether, Solana and Avalanche taking a beating. The signs of lack of demand have been building for a long time, and traders are partially stumped.
The collapse of Terra, a platform that supported one of the biggest experiments in decentralization finance, has knocked an already bearish market into wild contagion this month.
While Terra's operators had passed a plan to start afresh on Wednesday, investors in the rest of DeFi were less convinced.
A glitch in the process to make the Ethereum network less energy intensive added to the concern.
Edward Moya, senior market analyst at Oanda said bearish sentiment remains the theme for criptos. He noted thatEthereum's growing list of competitors could make the fallout from unexpected hits to its update, known as the Merge, particularly intense.
On Thursday, the price of ether was down as much as 11%, far below the key threshold of $2,000 which it needs to trade above if bearish sentiment is to be lessened.
Other tokens linked to protocols that are popular with decentralization projects like Polkadot, Solana and Avalanche were also falling, down between 11% and 17% over the last 24 hours.
After dropping to as low as $28,007, the price of cryptocurrencies acted as a haven, paring losses to around 1%. The largest decoupled Thursday from US equities was the result of price changes in risk assets in recent weeks.
Stocks rebounded from the lowest levels in the last year.
Demand for blockspace on the Ethereum network has decreased significantly since the collapse of Terra, which means that the network's so-called gas fees are falling.
Glassnode data shows that gas prices have been falling since December and recently reached multiyear lows, with the exception of a few spikes during high-profile minting events like Yuga Labs' Otherside land sale.
Mati Greenspan, founder of Quantum Economics, said Solana's NFT volume surpassesEthereum is a significant blow to investor confidence that it will remain the go-to base layer protocol of the decentralized web, despite just a single anecdotal day's data. We should not make any long term conclusions based on short term data, because the entire market is down right now. That's likely that it's going to cause a lot of headwinds for the token in the short term, coupled with poor price performance. DeFi developers are dusting themselves off after Terra collapse halved the sector's total value, and dampened markets aren't going to help in convincing them that now is the time to get back in the game.
The reorganization on Wednesday was a security risk, which played a crucial part in the network's highly anticipated technical upgrade.
Noelle Acheson, head of market insights at Genesis Global Trading said that part of the ETH drop is due to the reorg issue, which could mean a delay in expected Merge timing. When mixed with the context of the global macro environment, Pantera's Semir Gabeljic said that the resultant jitters meant bad business for investors who once were hot on Cryptocurrencies, the Federal Reserve's rate-hiking regime has caused volatility in the market and dulls previously hot growth and speculative assets. Guggenheim Partners Chief Investment Officer Scott Minerd said this week he expectsBitcoin to fall to $8,000. With help from Muyao Shen, Vildana Hajric and David Pan.