TerraUSD leaves BTC and crypto market on back foot.

Crypto Weekly Review May 15 – TerraUSD Sinks LUNA

Key Insights:

  • It is a week for the crypto market to forget, with TerraUSD (UST) sinking Terra LUNA and the broader market.
  • The UST de-pegging from the dollar led LUNA out of the top ten to #206 on CoinMarketCap.
  • LUNA’s meltdown wiped out $700 billion from the market, causing regulatory ire.

Stablecoins and Terraform Labs became the center of a crypto market storm in the week. TerraUSD (UST) saw the dollar peg algorithm fail epically, leaving TerraUSD at a week low of $0.0437 before partially recovering.

TerraUSD depegs to leave bitcoin and the broader market in the deep red.
UST 1505 Daily Chart

The UST meltdown had far-reaching implications. Terra LUNA imploded, tumbling to close to zero and out of the crypto top 200 by market cap.

The TerraUSD depeg left Terra LUNA at close to zero.
LUNA 1505 Daily Chart

After the UST catastrophe on Monday, Tether (USDT) added to the market angst on Thursday, with a fall from parity. USDT fell to a week low of $0.9511. Fears of another stablecoin collapse sent the markets into another tailspin before a recovery to $0.99 levels restored market order.

Tether tested market nerves after UST meltdown.
USDT 1505 Daily Chart

The events of the week saw the correlation between the bitcoin (BTC) and the NASDAQ 100 weaken for all the wrong reasons.

Bitcoin correlation with the NASDAQ weakens amidst market turmoil
BTCNASDAQ correlation – Daily Chart 1505

Bitcoin (BTC) Shows Resilience Amidst Market Bedlam

A chaotic week saw bitcoin slide to a week low of $25,836 before finding support to bounce back to $30,000 levels.

News of Bitcoin Whales jumping ship, however, raises concerns over the near-term outlook for BTC and the broader market.

On Friday, FX Empire reported the news of Bitcoin whales jumping ship, with a slide across the US equity markets adding pressure on whales to reduce risk and cash out to meet possible margin calls.

Notably, the current bearish trend started back in November, with BTC sliding from an ATH of $68,979 to this week’s current week low of $25,836.

Market angst over Fed monetary policy and the economic outlook had hit the crypto market head of this week’s capitulation.

Near-term, a move through the 50-day EMA ($31,460) and the 100-day EMA ($33,857) would restore some confidence.

A renewed threat of a regulatory overhaul of the crypto market could test investor appetite, however.

Terra Lab Returns the Risk of a Crypto Market Regulatory Overhaul

In response to the UST stablecoin and the demise of LUNA, lawmakers stepped forward, calling for action.

On Wednesday, the UST and LUNA collapse drew the attention of US Treasury Secretary Janet Yellen. Treasury Secretary Yellen highlighted the risks of stablecoins to financial stability and the need for a framework.

Yellen followed Wednesday’s comments on Capitol Hill with further calls for crypto regulations while noting that dollar-pegged stablecoins have yet to reach a scale “where they’re financial stability concerns.”

The ex-Fed Chair was not alone, with SEC Chair Gary Gensler taking the opportunity to target digital assets. Gensler staked claim on digital assets, saying that,

“Most crypto tokens involve a group of entrepreneurs raising money from the public in anticipation of profits – the hallmark of an investment contract or a security under our jurisdiction. Most crypto tokens are investment contracts under the Supreme Court’s Howey Test.”

Bitcoin Fear & Greed Index Sees Lowest Level Since 2020

In the week ending May 15, BTC looks set to finish with a 14% loss, following on from last week’s 11.5% decline. BTC is on target for a seventh consecutive weekly loss, its longest losing streak since 2018. In May 2018, BTC saw red for six weeks out of seven.

Bitcoin set for a seventh consecutive week in the red.
BTCUSD 7-day chart 1505

The Fear & Greed Index continued to reflect investor sentiment, with the Index falling from 18/100 to a Saturday week low of 9/100. It was the lowest level since March 14, 2020, when the Index stood at 8/100.

A fall deeper into the “Extreme Fear” zone suggests more trouble ahead.

On Sunday, the Index climbed to 10/100, though this may provide little comfort to investors looking for an entry price.

The index sits deep in the extreme fear zone.
Fear & Greed Index May 15.

Things were no better for the rest of the crypto top ten.

The Broader Market Tracks Bitcoin into the Red

In the week ending May 15, Terra (LUNA) is heading for a 99% slump to $0.00032 levels.

At the time of writing, ADA (-29.9%), AVAX (-37.6%), SOL (-33.6%), and XRP (-26.1%) are heading for heavy losses.

BNB (-18.4%) and ETH (-20.2%) look set for relatively modest losses, however.

The total crypto market cap slumped from a start of the week $1,554 billion to a week low of $1,082 billion before partially recovering to $1,262 billion.

While TerraUSD and Terra LUNA grabbed the crypto headlines, there were other news worth events.

News Highlights of the Week

  • Nomura Bank announced its first bitcoin derivatives offering.
  • Aussie ETFs went live amidst crypto market turmoil.
  • Germany issues crypto tax guide.
  • NFT creator Dapper Labs raised $725 million for Web3 developer growth.
  • Bank of Israel found public support for a digital Shekel.
  • Binance was among exchanges to delist TerraUSD and Terra LUNA.
  • MicroStrategy stock plunged amidst crypto market sell-off.