Cryptocurrencies began the week trading sideways but analysts expect further price weakness to come, with Bitcoin far from becoming a safe haven asset.
Bitcoin hovered around the US$30,000 support level, having eased 0.8% lower to US$29,524, while its closest rival by market value, Ethereum, gave up 0.3% to US$2,023.
“The consolidation [around key support levels] means that the trust in major cryptocurrencies hasn’t been damaged by the TerraUSD incident, yet it’s likely that investors would become pickier when choosing a token to invest in, as Terra’s collapse showed that the cryptocurrencies, no matter how popular they are, are not risk-free,” Ipek Ozkardeskaya, Swissquote senior analyst, said.
Although the rapid decline of digital currencies and the current weakness in Bitcoin’s price mean further lows may be seen this week, according to experts.
Naeem Aslam, Avatrade chief market analyst, said: “Last week, we saw the Bitcoin price falling near 24K, and this week it is likely that we may see a retest of this level.
“This is mainly because another stable coin [Terra] going belly up is going to bring higher scrutiny from lawmakers.”
Bitcoin and Ethereum were even further away from becoming safe havens compared with a month or two ago, nonetheless, if there were some sector-wide safe haven flows it would be towards the two leading coins.
They have shed 12% and 18% in value in the week-to-date respectively and are both approximately 58% off November's all-time highs.
Decentraland was one of the biggest fallers, having slipped 7.5%.
Cardano and Solana, however, were headed for green days, advancing 4.5% and 4.8% to offset Monday’s general trend.