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Bitcoin Falls Below $30,000 As UST Plummets, Interest Rate Leap on Inflation Data

"I understand the last 72 hours have been extremely tough on all of you - know that I am resolved to work with every one of you to weather this crisis," said UST backer Do Kwon.

Updated at 3:40 pm EST

Bitcoin prices fell below the $30,000 mark Wednesday amid an overnight plunge in the so-called stablecoin TerraUSD, that continues to rattle global cryptocurrency markets.

TerraUSD, which is more commonly known as UST, is a digital coin based on an algorithm that is designed to maintain a one-to-one parity against the U.S. dollar. That peg was broken over the weekend, triggering a slump in both UST prices themselves as well as another digital coin -- Luna -- that is mean to provide a trading pair. 

UST was was last seen at around 38.5 cents, with the stable coin's main backer, Do Kwon, urging players to "sit tight" as its designers formulated a rescue plan. 

"I understand the last 72 hours have been extremely tough on all of you - know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this. Together," Kwon said on his verified Twitter account Wednesday.

"The Terra ecosystem is one of the most vibrant in the crypto industry, with hundreds of passionate teams building category defining applications within," he added. "As long as these builders, TFL among them, continue to build - we will come out of this together."

Downward pressures were also evident from a jump in both the U.S. dollar and Treasury bond yields following disappointing April inflation data that suggested core consumer prices are starting to embed more deeply into various corners of the world's biggest economy. 

Benchmark 10-year U.S. Treasury bond yields rose 8 basis points to 3.06% following the data, and ahead of a planned auction later this afternoon, while the US dollar index, which tracks the greenback against a basket of six global currencies, moved back to a near 20-year high to 104.032.

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Bitcoin was last seen trading around 2.65% lower on the session at $29,506.90 each after hitting $29,250.00 each earlier in the session, a move that would extend its year-to-date decline to around 38% and move through the lowest levels since the summer of 2021.

The world's largest cryptocurrency has Bitcoin, which accounts for around a quarter of Coinbase trading volume, has fallen more than 56% since reaching an all-time high of $67,802.30 in November of last year. 

The collapse in Bitcoin, which accounts for around a quarter of the trading volume on the Coinbase Global COIN platform, formed part of the group's surprise first quarter loss and muted near-term outlook, with shares plummeting more than 23% in early Wednesday trading.

Coinbase said revenues for the three months ending in March fell 35% from last year to $1.17 billion, well shy of Street forecasts, as retail trading volumes fell 38% to just $74 million. The group also posted a surprise loss of $1.98 per share.

Overall trading volumes were only down 7%, thanks to a big jump in institutional participation, but the ongoing collapse in bitcoin prices has current quarter activity trending down by 30%. Monthly Transacting Users, or MTUs, were down 22% from the prior quarter to 8.9 million, Coinbase said, with both metrics forecast to be "lower than Q1" levels. 

Bitcoin's 2022 tumble comes amid a host of issues that the crypto world has yet to face, at least in terms of trading conditions, since it began its meteoric rise in the middle of the last decade.

Surging inflation, aggressive signaling on rate hikes by the Federal Reserve and other central banks, as well as rising bond yields and a resurgent U.S. dollar have all combined to add downward pressure on crypto assets even amidst wider adoption from various governments around the world to either add or compliment bitcoin into its national currencies. 

Bitcoin's broader adoption by the mainstream investment community has also tightened its correlation with broader tech benchmarks, given its sensitivity to interest rate increases and its connection to growth prospects in blockchain technology and the metaverse.