Bitcoin price falls to 16-month low in latest crypto crash

The price of bitcoin (BTC-USD) has tanked to a new 16-month low as a cryptocurrency sell-off extends amid a wider downturn in global equities and other assets such as oil.

The latest crypto crash saw the world's largest token wipe out all of its 2021 gains after plummeting as much as 11.5% to $27,400 (£22,490) in early trade on Thursday in London.

In the last 24 hours, the market value of the token, which accounts for nearly a third of the $1.8tn cryptocurrency market, declined 11% to $528bn, according to CoinMarketCap.

Read more: Live crypto prices

Last week, bitcoin fell 50% from its $69,000 November 2021 high as global economic and geopolitical headwinds knocked the cryptoasset.

The sell off wiped 15.4% of the entire crypto market, meaning it has now lost more than 50% of its value over the last six months as a market-wide downturn erased over $1.5tn from the market.

Ether (ETH-USD), the second largest crypto, which underpins the Ethereum network, was hardest hits in the market wipeout after losing over 20% over the last 24 hours. It crashed 27.3% to $1,890 at the time of writing.

Read more: Bitcoin drops 50% from November peak 

It comes after stablecoin TerraUSD (LUNA1-USD) decoupled from the dollar, triggering a stampede out of popular tokens after falling more than 99%.

The token is ranked among the top 10 most valuable cryptocurrencies in the world. The fall led to Binance temporarily suspending withdrawals on the coin at one point, preventing users to sell.

Meanwhile, the world's largest stablecoin, tether (USDT-USD), broke the $1 peg, down 1.8% to $0.98. The $80bn stablecoin is designed to track the value of the US dollar one-for-one.

Stablecoins are a class of cryptocurrencies that attempt to peg their market value to some external reference such as the US dollar or a commodity's price like gold to offer price stability.

"Bitcoin and the crypto markets have capitulated as Bitcoin has reached levels not seen since December 2020. LUNA is now below $0.05 as UST has failed to restore its peg," said Marcus Sotiriou, Analyst at the UK based digital asset broker at GlobalBlock.

"It is clear that confidence in the protocol has been lost, and now LUNA is mainly being used as exit liquidity for UST holders. In addition, they have built up a significant amount of bad debt."

Experts say the crash is a "tough pill to swallow" for first-time crypto investors and reinforces the crypto markets "Wild West reputation".

"The crypto sell off has been driven by a culmination of long and short term factors including worries about regulation, security breaches as well as pressures buffeting traditional markets such as geopolitical uncertainty and US interest rate hikes," said Myron Jobson, senior personal finance analyst at interactive investor. 

Research from Interactive Investor found that 45% of young adults aged between 18 and 29 have made crypto their first investment of choice, with a large number funding this through a cocktail of credit cards, student loan, and other loans.

Read more: Coinbase losses show crypto investors moving to decentralised exchanges

The crash also follows a bleak first-quarter earnings report from Coinbase (COIN). The company warned of a significant drop in the usage of its centralised exchange during the time period.

It had 9.2 million monthly transacting users in the first quarter of this year, a decline of 2.2 million, compared with 11.4 million in the three months to December 2021.

Shares in the crypto platform lost 26.4% on Wednesday night, and were down 7.5% in pre-market trading on Thursday.

The company, the largest cryptocurrency exchange in the US, was valued at nearly $86bn after its blockbuster listing on the Nasdaq in April last year.

However, Coinbase's stock has lost more than 70% of its value since late March as a broader slide in tech stocks and the latest bout of crypto declines puts the company's future on the line.

Shares closed at $328.28 after its first day of trading on 14 April, now trading at 50.04 on Thursday in pre-market trade.

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