The cryptocurrency market has suffered massive losses as cryptocurrencies overall have lost nearly $800 billion in market value in the past month, according to data site CoinMarketCap. 

The domino effect in the crypto market began when the United States Federal Reserve raised its interest rates last week, negatively affecting the stock markets, then stablecoin terraUSD (UST) lost its edge over the U.S. dollar and fell as low as $0.67. 

This led to its support coin, Luna, losing almost 99 per cent of its value.

“Terra (LUNA) represented the second largest ecosystem in terms of total value locked (TVL) in DeFi, with approximately $16.8 billion. The ecosystem is powered by two tokens: UST and LUNA. UST is a stablecoin pegged 1:1 to the U.S. dollar, while LUNA is a governance token. The entire ecosystem is built around the UST stablecoin,” Gabriel Debach, an analyst at eToro, told London South East. 

The price of Bitcoin has dropped to around $27,000 per bitcoin, down 12 per cent in the last 24 hours. This decline has affected the wider crypto market with virtual coins dropping in value. Ethereum, BNB, XRP, Solana, and Cardano recorded even steeper losses. 

Ethereum has crashed 22 per cent in the past 24 hours and  BNB, XRP, Solana and Cardano have recorded losses between 25 per cent and 33 per cent.  

Despite decentralisation being the crypto market’s selling feature, Bitcoin and other currencies have remained connected to the rest of the financial market, regulated by governments. 

At the start of the COVID-19 pandemic, global markets fell and so did Bitcoin by 57 per cent. Stock markets and cryptocurrencies then both recovered and Bitcoin reached an all-time high in October, hitting a new record high of $68,950, according to data from Coindesk. 

On May 11, Trading windows DOW and Nasdaq recorded their worst single-day declines since 2020.  The Dow Jones Industrial Average lost 1,063 points, or 3.12 per cent, to close at 32,997.97 and  NASDAQ Composite fell 4.99 per cent to finish at 12,317.69, its lowest closing level since November 2020. 

Since February, the market has been unstable by Russia’s invasion of Ukraine, which has exacerbated inflation, supply chain issues and oil prices. Slowed growth in China amidst COVID-19 outbreaks there are also contributing to financial anxieties.

The downward trend in the market has sent traders panicking. 

Coinbase, an exchange platform, said its customers could lose their cryptocurrency if the crypto exchange were to go bankrupt.

“In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings,” the company said in its first-quarter earnings report.

CEO Brian Armstrong took to Twitter to assure investors that their “funds are safe at Coinbase, just as they’ve always been.”

“We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties,” Mr Armstrong said on Wednesday.