Bitcoin tumbles, a stablecoin plunges in wild week in crypto

NEW YORK (AP) — It’s been a wild week in crypto, even by crypto standards.

Bitcoin tumbled, stablecoins were anything but stable and one of the crypto industry's highest-profile companies lost a third of its market value.

Here's a look at some major developments in cryptocurrencies this week:

BITCOIN

The price of bitcoin dropped to around $25,420 this week, its lowest level since December 2020, according to CoinDesk. It steadied around $30,000 Friday, but that's still less than half the price bitcoin fetched last November.

Some bitcoin proponents have said the digital currency could protect its holders against inflation and act as a hedge against a decline in the stock market. Lately, it's done neither. Inflation at the consumer level rose 8.3% in April compared to a year ago, a level last seen in the early '80's. With the Federal Reserve aggressively raising interest rates to try to tamp down inflation, investors are dumping risky assets, including stocks and crypto. The S&P 500 is down more than 15% this year. Bitcoin has dropped about 37% year to date.

Other cryptos have fared just as poorly. Ethereum has dropped 44% and dogecoin, a cryptocurrency favored by Tesla CEO Elon Musk, has fallen 53%.

STABLECOIN COLLAPSE

Stablecoins have been viewed as a safe harbor haven among cryptocurrencies. That’s because the value of many stablecoins is pegged to a government-backed currency, such as the U.S. dollar, or precious metals such as gold.

But this week one of the more widely-used stablecoins, Terra, experienced the cryptocurrency equivalent of a run on the bank.

Terra is a stablecoin in a cryptocurrency ecosystem known as Terra Luna. Terra is an algorithmic stable coin, which means it adjusted its supply through complicated buying and selling to keep its peg to $1....