Just as cryptocurrencies are on the cusp of being integrated into economies, and regulators figure out what to do with them, their value has been smashed.

Crypto conversations are swirling on social media platforms such as Reddit between anxious investors.

Many Australians, some surveys say one in five, opted for the easy gains of crypto as low interest rates reduced returns for regular savings.

Some wanted a shortcut for accumulating a house deposit, and they were riding high until the peaks of April this year.

The more than $US1 trillion meltdown has crashed the price of the biggest and most well known - Bitcoin and Ethereum - and rattled more than 1200 others.

Already tracking the fall of tech firms on the US stock market, the sharp sell-off of the past few days was triggered by the downfall of $US18 billion stable coin TerraUSD (UST) and its Luna token.

Naeem Aslam, chief market analyst at Avatrade, described the sell-off as a "blood bath".

The so-called stable coin was meant to be pegged to the US dollar.

The peg, where one Terra equals one US dollar, is gone.

The Luna, whose supporters are known as "lunatics", once theoretically able to be cashed in for one dollar, dropped to a fraction of a US cent.

Dominant Bitcoin, which leads other crypto prices, took a body blow when the organisation behind Terra and Luna dumped its Bitcoin reserves.

NAB market economist Taylor Nugent said on Friday the crypto landscape has been roiled again as Tether, the largest stable coin, also tested its link to the US dollar.

Tether fell as low as $US0.9511, before reverting back above 99 US cents.

"That follows the implosion of the TerraUSD stablecoin on Wednesday," he said in a note.

"The stabilisation in Tether and the restart of the Terra blockchain has seen some panic subside."

Bitcoin rose as much as six per cent to about $US30,000 after falling to about $US25,000.

Australian crypto punters surged almost two-thirds (63 per cent) in 2021 compared to 2020, with more than 800,000 taxpayers dabbling in digital assets in the last three years, the tax office says.

Most will be under water.

"Stable coins like Terra are supposed to bring more stability to the space," Mr Aslam said.

"It is clear that bulls have lost the battle, and the selling pressure is very much on.

"The big question for traders is if the current sell-off will shock Hodlers," he said.

So-called Hodlers hang on regardless of price movement. The tag, part of crypto culture, comes from the misspelling of "hold" as "hodl" in a Bitcoin forum post almost 10 years ago.

Becoming a Hodler has become a badge of honour during volatility for some, and an irrational position for others.

Singapore-based stablecoin boss Do Kwon has acknowledged Terra's "significant deviation" from the US dollar peg and what it has done to the Luna.

"Terra's focus has always oriented itself around a long-term time horizon, and another setback this May, similar to last year, will not deter the #LUNAtics," he said.

"Short-term stumbles do not define what you can accomplish. It's how you respond that matters."

True believers are still calling for a response, other than minting more Luna and diluting its worth.

DigitalX investment analyst Pratik Kala was not surprised the $US18 billion algorithmic stable coin collapsed.

"How is that size even possible? After all, $18 billion is more than the market cap of Coles," he said.

"And it took Coles 108 years of hard work, blood, sweat and tears to reach that value."

Terra was founded in January 2018 by Daniel Shin and Do Kwon with the goal for UST to become the de facto stablecoin used in the crypto universe and traditional e-commerce.

"There are several flavours of algorithmic stablecoins in the market - some are partially backed by real assets and some are literally created out of thin air," Mr Kala said.

Market analyst Tina Teng at CMC Markets said there is "extreme fear" in risky assets, sparked by unexpectedly strong US inflation data.

"The risk-off selloff in the so-called stablecoins triggered the cryptos' crash," she said.

"If the equity markets selloff continues, we may see a further crash in the crypto markets."

But Ms Teng said the broader and ongoing development of blockchain technologies must be considered.

"As we cannot really work out a fair value as a normal asset class, it is more technology related and has a positive correlation with the tech stocks," she said.

The carnage did not stop the first crypto-linked exchange-traded funds in Australian dollars making their debut on Thursday.

Cosmos Asset Management CEO Dan Annan said the Cosmos Purpose Bitcoin Access ETF fund gives investors a secure and easy way to add cryptocurrency to their assets, in a liquid and well-regulated market.

"(This) is a significant milestone for cryptocurrency in Australia, and a critical moment for the growing number of investors interested in cryptocurrency," he said.

Two spot crypto EFTs in Australian dollars, tracing prices of Bitcoin and Ethereum, have also been listed by the world's largest crypto-currency exchange traded product issuer 21Shares.

Available through brokers such as Commonwealth Securities, they come with stern product disclosure statements that warn investors could lose everything.

The array of risks, above and beyond buying Australian shares, may result in crypto-assets being lost, hacked, stolen or inaccessible, CommSec warns.

"As a result, the value of a crypto-asset may decline, including to zero," the popular trading platform says.

The securities are financial products under Australian corporations law, which means the buyer does have the protection of the issuer being licensed and required to comply with financial services regulation.

Day - and night - traders of crypto must currently fend for themselves.

But new laws for the crypto ecosystem are in the works, with a tentative 2025 time-frame, as the emerging virtual economy expands into gaming, art, real estate, and lending.

An "Australian stamp of quality" could help, according to the Department of Treasury, which has introduced a dedicated Crypto Policy Unit.

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Australian Associated Press