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May 12 (UPI) -- Bitcoin values fell below $26,000 on Thursday for the first time in more than a year following a sell-off that wiped out more than $200 billion from the crypto market in a single day. The value of bitcoin dipped early before rebounding and rising back to almost $30,000 by early Thursday afternoon.
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CoinMarketCap noted that overall cryptocurrencies lost more than $200 billion of its wealth, fueled by the collapse of TerraUSD stablecoin.
TerraUSD was pegged to the dollar or other traditional assets to avoid fluctuation, but its algorithm needed traders to maintain its value.
A sell-off in sister currency Luna, though, drove TerraUSD down to 23 cents, less than half of its previous value, in one day. It had been trading at about 54 cents, which also was below the anticipated $1.
"Everyone knows that these algorithmic stablecoins aren't safe," said Ethan Buchman, a founder of the blockchain hub Cosmos, according to The New York Times. "They have these downside dynamics. People call it 'the death spiral.'"
Treasury Secretary Janet Yellen said that TerraUSD's meltdown was further proof that the federal government needs to get involved with cryptocurrency rules.
"What's happened with UST isn't surprising and lends a sense of urgency for Congress to act decisively to set clear rules of the road for stablecoin issuers," Yellen said, according to The New York Times.
Bitcoin reached its all-time high last November -- $64,400.
