Bitcoin has recovered slightly, but is still set for a record losing streak after the collapse of a so-called stablecoin.
Crypto-assets have taken a pounding after a digital token called Terra – supposed to be pegged to the US dollar – crashed in value.
The impact has rippled through markets with Bitcoin, the biggest cryptocurrency by total market value, hitting a 16-month low at one point.
Crypto-assets have also been swept up in broad selling of risky investments on worries about high inflation and rising interest rates.
Bitcoin managed to edge back in Friday trading to above $30,500 (£24,920).
This represented something of a recovery from a 16-month low of around $25,400 (£20,753) reached on Thursday.
But it remains far below week-ago levels of around $40,000 (£32,682) and, unless there is a rebound in weekend trade, is headed for a record seventh consecutive weekly loss.
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“I don’t think the worst is over,” said Scottie Siu, investment director of Axion Global Asset Management, a Hong Kong based firm that runs a crypto index fund.
“I think there is more downside in the coming days.
“I think what we need to see is the open interest collapse a lot more, so the speculators are really out of it, and that’s when I think the market will stabilise.”
But broader financial markets have so far seen little knock-on effect from the cryptocurrency crash.
James Malcolm, head of FX strategy at UBS, said: “Crypto is still tiny and crypto integration within broader financial markets is still infinitesimally small.
“This idea that what goes on in crypto stays in crypto – that’s in many ways where we still are at the moment.”
Selling has roughly halved the global market value of cryptocurrencies since November, but this has turned to panic in recent trading with the squeeze on stablecoins.
Ratings agency Fitch said in a note on Thursday that there could be “significant negative repercussions” for cryptocurrencies and digital finance if investors lose confidence in stablecoins.
However, Fitch said that weak links between crypto markets and regulated financial markets will limit the potential of crypto market volatility to cause wider financial instability.
