Amid a collapse in many cryptocurrency prices this week, fans of the Washington Nationals might have spotted an odd tweet from the baseball team’s account.

“Crypto 101,” it read, as an embedded video played clips of Nats stars in action and a voice-over introduced basic concepts of digital money. “You have questions. We’ve got answers.”

Terra, the crypto company that sponsored the tweet, could have started by answering some questions about itself.

The company earlier this year signed a 5-year, $40 million promotional deal with Washington’s baseball team that includes introducing its cryptocurrency as a payment method at the ballpark as soon as next year. Yet that digital coin, a type of crypto known as a stablecoin because it aims to keep its price at $1, has been in free-fall this week. TerraUSD, or UST as it is known, was trading as low as 30 cents on Wednesday morning before recovering to 80 cents on Wednesday night.

It isn’t clear yet what sent UST into a tailspin. But the cratering of what had been the third-largest stablecoin by total market value points to a wider reckoning for a hype-fueled asset class that is deflating as dramatically this year as it inflated in 2021.

A sell-off over just the last seven days has erased more than a quarter of the value from the global crypto market, according to CoinMarketCap. Most dramatically, UST’s sister coin, luna, lost more than 90% of its value in the past week, all but wiping out most people who had invested in it.


And interest in crypto trading overall seems to be cooling off. Coinbase, the largest U.S.-based crypto trading platform, posted a first-quarter loss of $430 million Tuesday as its stock continued a slide that has it down 79% this year. The exchange reported its active monthly users dropped to 9.2 million in the first quarter of this year, down from 11.4 million in the previous quarter.

Bitcoin, the world’s most popular cryptocurrency, dropped below $30,000 on Wednesday, down more than 56% since its all-time high in November. It is now trading near its 2021 low, meaning most investors who bought it as popular interest in crypto surged last year are now in the red on their investment. In total, an estimated 40% of bitcoin holders are underwater on the asset, according to a new analysis from crypto analytics firm Glassnode.

Ethereum, also widely held, has more than tripled since December 2020 but is down 54% since its all-time high six months ago. Yet the most popular stablecoin, tether, has not seen its value drop below a dollar. It does not use algorithms the way UST does; the latter is an unorthodox method that essentially relies on trades instead of assets to back it up and which may be responsible for its plummet.

The plunge in crypto prices tracks a broader move by investors to dump risky assets, such as tech stocks, as the Federal Reserve hikes interest rates to battle inflation. The tech-heavy Nasdaq has fallen 10% since last Thursday.


But the downturn in the crypto market is particularly stinging for the upstart industry. It comes just as industry leaders saw the technology gaining the type of institutional adoption they hope will push it into the financial mainstream.


Institutional players have overtaken retail investors on Coinbase, for example. Mom-and-pop traders accounted for a third of the volume on the platform last year, down from 80% in 2018, according to new research from Morgan Stanley. And Wall Street firms continue edging into the sector. Goldman Sachs in March executed its first over-the-counter trades of bitcoin options; BlackRock last month announced it is investing in the stablecoin company Circle Internet Financial.

Tyler Gellasch, founder of the nonprofit Healthy Markets Association, said traditional financial institutions have missed too many years of booming crypto values to be dissuaded from the crypto market now.

“Concerns over fraud, volatility, and regulatory uncertainty kept many traditional financial firms on the sidelines for the boom in digital assets,” he said. “After several years of missing out on the profits, many in traditional finance have just recently committed to getting involved in digital asset markets. I’ll be surprised if they immediately U-turn now.”

Crypto’s challenges could also tarnish some of the entities who’ve aligned with them. The NBA, for example, has bet big on it, with the Warriors, Mavericks and Heat all making splashy deals with crypto companies — a potential optics issue as all three teams play postseason games this week. The specter of companies like Coinbase (the league’s official crypto-platform partner) and FTX (which has deals for arena branding with the Warriors and Heat) pushing their services as the sector craters is an awkward look.

Some academic experts say the volatility is nothing new in crypto and cautioned against reading a fundamental meaning into this week’s crash or the larger drop over the past six months.

David Yermack, professor of finance and business transformation at New York University’s Stern School of Business who closely studies crypto and the economy, said he did not foresee any contagion to the larger economy or other investments.


“The total market cap of the crypto economy is $1.3 trillion, which is so much smaller than what people invest in stocks and real estate,” Yermack said. “This is mostly speculation by young people taking a small chance at a big payday.”

Financial giants are signaling they see no reason not to make it easier for everyday Americans to invest in crypto, despite pushback from Washington policymakers. Fidelity Investments last month said it will become the first major retirement plan operator to allow investors to put some of their 401(k) savings into bitcoin.

Federal Reserve Chair Janet Yellen, testifying before the Senate Banking Committee on Tuesday, highlighted the threat unregulated stablecoins could pose. “That simply illustrates that this is a rapidly growing product,” she said, “and that there are risks to financial stability, and we need a framework that’s appropriate.”