Bitcoin rose on Thursday following a similar jump in U.S. stocks, but investors are still reeling from a dramatic plunge over the last few days that saw the world’s largest cryptocurrency almost drop below $20,000.
At 3:40 a.m. ET, bitcoin was trading at around $21,667.90, up nearly 3% in the past day, according to data from CoinDesk.
However, bitcoin is still sitting at levels not seen since December 2020. The digital currency is down about 27% in the last week and has dropped nearly 70% from its all-time high in November.
Other cryptocurrencies, including ether, were also higher in the last 24 hours.
Bitcoin has been closely correlated with stock indexes, in particular the Nasdaq, which rose on Wednesday after the U.S. Federal Reserve hiked interest rates by 0.75 percentage point. That’s one reason why bitcoin rose slightly on Thursday.
But there are still a number of issues weighing on the crypto market.
Sentiment is still shaken after the collapse of so-called algorithmic stablecoin TerraUSD along with its sister token luna.
A stablecoin is a type of cryptocurrency that is supposed to be pegged to a real-world asset. Many look to be pegged one-to-one to the U.S. dollar. Some, such as tether and USD Coin, are backed by real assets such as fiat currencies and government bonds. But many algorithmic stablecoins, such as TerraUSD, don’t have assets in reserve. Instead, the $1 peg is governed by an algorithm.
The current bear market, which is often dubbed a new “crypto winter,” is also testing the strength of other projects.
Another algorithmic stablecoin USDD also lost its dollar peg earlier this week. Tron DAO Reserve, which is responsible for maintaining USDD’s $1 peg, holds other cryptocurrencies in their reserve, including the stablecoins tether and USDC.
Meanwhile, all eyes are on Celsius, the crypto lending platform that might be facing insolvency, sparking fears of contagion into the broader market. Earlier this week, Celsius paused withdrawals for customers.