Is Bitcoin Leading or Following Global Demand for Risk?

Bitcoin and ALTs Last Week

Bitcoin is down 3.6% over the past week, ending near $29,900. Ethereum lost 5.8%, while other leading altcoins in the top 10 fell from 5.4% (XRP) to 9.2% (Cardano). The exception was Binance Coin (+3.3%).

According to CoinMarketCap, the total capitalisation of the crypto market has changed little over the past seven days at 1.29 trillion, as the decline at the beginning of the last week was largely reversed by its end.

BTC Today and Stock Markets Correlation

By Monday, the cryptocurrency fear and greed index is down 4 points to 10. Bitcoin has declined for seven consecutive weeks amid a sell-off in stock markets. Bitcoin is in its 13th day of trading through the $30K level.

Over the weekend, we saw almost traditional buying by retail investors, but their strength only allowed them to bounce back from Friday’s losses. If we look at Bitcoin as a leading indicator of risk demand rather than tailing off moves in the S&P500 or Nasdaq, we may well be in a situation where the tail rules the dog. Galaxy Digital CEO Mike Novogratz said that the altcoin market will collapse by another 70% with US Fed policy and a bearish trend.

Chart, line chart Description automatically generated

Crypto News

Microsoft co-founder Bill Gates said he only invests in assets that “deliver returns”. In his view, cryptocurrencies do not fall into that category. Billy Marcus, one of the creators of Dogecoin, said the cryptocurrency market is a mix of unhealthy optimism, FOMO, panic, scams, gambling, and widespread stupidity. He said he has not been involved in the DOGE project for more than 7.5 years but describes himself as a coin supporter.

ECB head Christine Lagarde said that, unlike central bank digital currencies, cryptocurrencies have no value and are not based on anything. A group of G7 finance ministers pointed to the importance of accelerated legislation to regulate digital assets following the collapse of the UST stable coin and LUNA cryptocurrency.

by FxPro’s Senior Market Analyst Alex Kuptsikevich

Indian Crypto App CoinSwitch Chief Insists Clear Rules on Digital Coins

Key Insights:

  • Clear crypto regulations in India could bring “peace and more certainty,” says CoinSwitch’s CEO. 
  • He said crypto rules could solve regulatory uncertainty and safeguard investors.
  • The Reserve Bank of India supported a crypto ban citing the threat to the country’s financial stability.

The cryptocurrency regulation is finding swathes of enthusiastic supporters across the globe, while it seems to be a real conundrum in India. Though the Indian government seems to have made a decision on crypto taxation, it is still struggling to draft a policy for the sector.

Additionally, the crypto sector in the country has been rapidly gaining popularity, especially among the young, in the recent past. For instance, per a Chainalysis report, India is reported to be one of the world’s fastest-growing crypto markets, increasing by 641% between July 2020 and June 2021.

CoinSwitch CEO seeks clarity on crypto regulation

Various crypto industry players in India have sought clarity from the government on crypto regulation. Even the Supreme Court of India recently asked the Centre to make a clear stand on whether bitcoin (BTC) is legal.

In the row, India’s top crypto app CoinSwitch’s chief Ashish Singhal on Sunday called for regulatory “peace and certainty.” He said that this could address the current uncertainty and safeguard crypto investors.

Speaking at the World Economic Forum in Davos, he expressed concerns that crypto holders in India face many uncertainties. He told Reuters,

“Users don’t know what will happen with their holdings – is government going to ban, not ban, how is it going to be regulated?”

Adding to it, he also stressed the importance of regulations. Singhal noted,

“Regulations will bring peace and more certainty.”

CoinSwitch, which recently delisted stablecoin TerraUST and LUNA after the collapse of the Terra network, boasts a market cap worth $1.9 Billion and over 18 million users. The Bengaluru-based firm is backed by A16Z, Tiger Global, and Coinbase Ventures.

However, CoinSwitch, along with other leading exchanges, disabled the rupee deposits, making it more difficult for users.

Addressing regulation gaps

According to Singhal, having ‘clarity’ in crypto regulations could offer assurance to holders and boost the country’s crypto sector.

Singhal noted that the recent taxation changes, new crypto advertising guidelines, and the recent curb on celebrity endorsements are still significant work to streamline the sector.

Global crypto exchange Coinbase launched in India in April. Weeks after the launch, it halted its usage of an inter-bank fund transfer service (UPI). The exchange’s CEO recently quoted the Reserve Bank of India and the government’s pressure over disabling the UPI payment service.

Singhal said that authorities have concerns over bad actors, given the decentralized nature of digital assets. Besides, the central bank also backed the banning of cryptocurrencies, citing financial instability. The RBI worried that cryptos might lead to the “dollarization” of an economy.

Singhal added,

“We are pushing for regulations. With the right regulation, we can get the clarity.”

Bitcoin (BTC) Ends at $30,000 but Extends Its Worst Losing Streak

Key Insights:

  • On Sunday, bitcoin (BTC) rose by 2.90% to end the week down by 3.30%, an eighth consecutive weekly loss.
  • Weekend support reduced the deficit for the week, while the threat of an imminent regulatory overhaul left BTC under pressure.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 100-day EMA.

Bitcoin (BTC) rose by 2.90% on Sunday. Following a 0.84% gain on Saturday, bitcoin ended the week down by 3.30% to $30,264. The upside over the weekend came despite the recent increase in regulatory scrutiny.

A quiet weekend on the crypto news wires provided bitcoin and the broader market with much-needed respite.

Last week, investor sentiment toward a likely crypto regulatory overhaul added to the market angst. With investors fretting over Fed monetary policy and the threat of a recession, increase regulatory scrutiny may be the least of their worries, however.

For some investors, the collapse of TerraUSD (UST) and Terra LUNA may even justify the need for increased regulatory oversight.

The Bitcoin Fear & Greed Index Slides Despite a Bullish Weekend

This morning, the Fear & Greed Index fell from 14/100 to 10/100. The fall deeper into the Extreme Zone came despite bitcoin’s return to $30,000 levels.

BTC Fear & Greed Index slides back to 10/100
Fear & Greed 230522

Based on the trend, the pullback suggests a bearish start to the week, with several drivers, including regulatory scrutiny, currently in play and bearish for bitcoin and the broader crypto market.

A bullish start to the week for the US equity markets delivered early support, however. At the time of writing, the NASDAQ 100 mini was up 121.75 points.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.07% to $30,242.

BTC sees a mixed start with resistance at $30,500 key.
BTCUSD 230522 Daily Chart

Technical Indicators

BTC will need to avoid the $29,977 pivot to target the First Major Resistance Level at $30,735.

BTC would need the broader crypto market to support a breakout from $30,500.

An extended rally would test the Second Major Resistance Level at $31,214 and resistance at $32,000. The Third Major Resistance Level sits at $32,447.

A fall through the pivot would test the First Major Support Level at $29,509. Barring an extended sell-off, BTC should steer clear of sub-$28,000 levels. The Second Major Support Level at $28,747 should limit the downside.

Avoiding the pivot would bring $31,000 into play.
BTCUSD 230522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. This morning, BTC sits below the 100-day EMA at $31,364. The 50-day narrowed to the 100-day EMA. The 100-day EMA fell back from the 200-day EMA, however, BTC negative.

A move through the 100-day EMA to $31,500 would support a breakout session. By contrast, a fall through the 50-day EMA would bring support levels into play.

BTC in the hands of regulatory scrutiny near-term.
BTCUSD 230522 4 Hourly Chart

Crypto Weekly Review May 22 – BTC Faces Another Weekly Loss

Key Insights:

  • After a week for the crypto markets to forget, this was a week Terra co-founder Do Kwon may not forget.
  • Regulatory chatter peaked, with the G7, UK, and US regulators targeting cryptos.
  • China became the second largest Bitcoin (BTC) mining nation despite a mining ban.
  • From the top ten, Binance Coin looks set to buck the broader crypto market trend, with a modest rise.

Following the previous week’s collapse of TerraUSD (UST) and Terra LUNA, regulatory chatter gathered momentum in the week to weigh on bitcoin (BTC) and the broader market.

The pickup in regulatory chatter didn’t take the spotlight from the increased scrutiny of stablecoins and Terraform Labs.

Do Kwon became the center of attention for a second consecutive week. It was a three-pronged attack for the CEO of Terraform Labs.

News hit the wires of a 100 billion won tax fine for tax evasion, an investor lawsuit for damages of 1.4 billion won, and South Korean prosecutors investigating Do Kwon for running a Ponzi.

January reports of South Korean prosecutors wanting to put crypto criminals away for life don’t bode well for Do Kwon.

The increased attention from lawmakers tends to test investor support for cryptos.

Bitcoin (BTC) Failed to Deliver a Broad-based Crypto Rebound

A bullish start to the week saw bitcoin (BTC) strike a Monday week high of $31,296 before hitting reverse.

The reversal saw bitcoin fall to a Wednesday week low of $28,610 before retesting resistance at $30,500.

For the week, bitcoin looks set for a 4% decline, which would mark an eighth consecutive weekly loss, its worst losing streak.

Bitcoin on target for an eighth consecutive weekly loss.
BTCUSD 220522 Weekly Chart

Market angst over Fed monetary policy and the economic outlook, with the renewed threat of more stringent regulatory oversight, tested support for bitcoin and the broader market.

The bearish sentiment was evident in the Bitcoin Fear & Greed Index, which fell to 8/100, its lowest level since March 2020.

While recovering to 14/100 on Sunday, the Index remained deep in the “Extreme Fear” zone.

BTC Fear & Greed Index in the Extreme Fear Zone
Fear & Greed 220522

Bitcoin’s decline was in line with the NASDAQ 100, which ended the week with a 3.82% slide.

Bitcoin - Nasdaq correlation remained strong in the week.
BTCNASDAQ 2205

Things were not much better for the rest of the crypto top ten.

Binance Coin Bucks the Broader Crypto Market Trend

In the week ending May 22, SOL and ADA are heading for losses of 12.5% and 9.0%, respectively, with DOGE (-7.2%), ETH (-5.4%), and XRP (-6.0%) also on the way to weekly losses.

BNB looks set to buck the trend, however, with a 2.7% gain.

The total crypto market cap fell from a start of the week $1,334 billion to a week low of $1,204 billion before partially recovering to $1,277 billion.

US Lawmakers and the G7 Look to Expedite More Stringent Regs

Without surprise, regulators remained front and center, with investors expecting a united response to the collapse of Terra LUNA and stablecoin TerraUSD.

G7: Officials resumed discussions on crypto regulations that ground to a halt in December 2020. Finance ministers called for crypto assets to fall under the same regulatory regimen as the rest of the financial system. Ministers called for tougher rules to combat money laundering and the disclosure of reserves.

UK: The UK’s Financial Conduct Authority (FCA) announced expediting plans to implement a regulatory framework for stablecoins. The UK Treasury will hand the FCA new powers to regulate crypto assets later this year.

US:

SEC Chair Gary Gensler talked of other cryptos mirroring Terra’s demise to harm investors. The SEC Chair did not predict a few failures but many. Gensler also pitched for additional resources to monitor the crypto industry after recently beefing up its enforcement team.

Rostin Behnam, the Chairman of the Commodity Futures Trading Commission (CFTC), raised concerns over the possible effect of a crypto crash on traditional assets and markets. Behnam also talked of adding resources and ramping up efforts to target crypto fraud and manipulation cases.

Capitol Hill quizzed lobbyists in the wake of the TerraUSD collapse to ascertain whether the UST collapse was avoidable and whether other stablecoins are at risk.

Crypto News Highlights of the Week

  • Underground miners defied the Beijing mining ban, with China becoming the second largest Bitcoin mining nation based on new data.
  • SEC filed its reply to support its claim that attorney-client privilege protects documents related to William Hinman’s speech.
  • TAG Heuer partnered with BitPay to accept online crypto payments in the US.
  • SWIFT Network began the exploration of cross-border CBDC payments.
  • Ethereum Proof-of-Stake transition is slated for August 2022.
  • Crypto FTX announced plans to introduce stock trading.
  • Socios football Fan Tokens surged following listing news and Chiliz network updates.
  • Crypto venture capital investor Andreessen Horowitz debuted a $600m Web3 gaming fund.
  • UK Treasury to selectively legalize stablecoins as a means of payment.

The Why and How of Investing In a Crypto Bear Market

Key Insights:

  • When the markets are experiencing sustained declines they’re called bear markets.
  • With Bitcoin and the global crypto market cap down by over 50% from its all-time high. 
  • This article looks at the art of investing in a bear market. 

Bear markets might be stressful for investors but they can be seen as good investment opportunities to buy in at lower prices.

In this article, you will learn what exactly defines a bear market, how you can prepare for it, and how you can profit from it.

While traders and investors dread the long and cold bear markets as though they’re the grim reaper, bear markets aren’t as bad. Sometimes, a bear market could provide decent opportunities to enter the market with lower risks, higher returns, and ‘dip-buying’ opportunities.

Nonetheless, bear markets give rise to notoriously volatile price actions and extreme losses in some cases, so without proper research, one could easily get Rekt during these times. This article will deep dive into the what, how, when, and why of crypto bear markets.

What is a bear market?

In simple terms, a bear market is when the prices of the prime assets of a sector or multiple sectors continue to decline for a considerable amount of time. For traditional as well as cryptocurrency markets, bear markets occur when the market as a whole experiences at least a 20% drop from recent highs.

A bear market can be identified by looking at the fall of the S&P 500 or Nasdaq Composite or bitcoin price for cryptos. Owing to the fall in the price of the top assets, small-cap and mid-cap assets also experience bearish price losses due to generally high price correlation.

During bear markets, supply is greater than demand, confidence is low, and prices are on a downtrend. Bear markets can be tricky for inexperienced or new traders. Additionally, it’s relatively difficult to predict when the end of a bear market or to find the exact price bottom to ‘buy the dip.’

Now comes the crucial question, are we in a bear market?

Are bears leading the market?

The global crypto market capitalization was down by almost 60% from its all-time high of $3 trillion as it stood at $1.25 trillion at press time. The top cryptocurrency by market cap, bitcoin (BTC), was down by 56% from its all-time high made in November last year.

FXempire, BTC, Crypto
BTC price ATH | Source: FXEmpire

While ether (ETH), the top altcoin, was down by 58% from its all-time high price of $4,847. Thus, it seemed like cryptocurrency holders were, in fact, in a full-blown bear market. Additionally, the rangebound movement of the larger crypto market cap and most top coins’ prices confirmed the bear market doubts.

Notably, the global crypto market was experiencing double-digit percentage losses, with BTC dipping to as low as $25,000 briefly on 12 May for the first time since July 2021. The bearish market sentiment, lower social volumes, and the fall of the Terra ecosystem have many investors understandably worried.

This, however, doesn’t mean that you cannot function in a bear market. After all, the crypto market never stops or sleeps. So, how and why should you invest in a crypto bear market?

Why invest in bear markets?

Bear markets can undoubtedly be scary times for newcomers and even older market players, as nobody enjoys watching the value of their portfolios go down. On the other hand, bear markets can provide opportunities to put money to work for the long run while assets are trading at a discount.

Usually, newcomers enter the market on social hype or out of FOMO (fear of missing out); however, bear markets are actually good opportunities for investors to enter the market as most assets trade at a discount.

Additionally, bear markets provide a good opportunity for shorting assets as prices see large price drops. However, since the crypto markets are highly volatile, shorting assets is something experienced traders take up. While shorting coins could be profitable, it comes with its set of risks.

How to invest in a crypto bear market?

While there are no instant tips or quick strategies for surviving in a crypto bear market, analysts and traders often recommend some strategies. For instance, portfolio diversification can help reduce investment risk by spreading your capital among different assets during a bearish wave.

That said, thinking long-term would always help navigate through bear markets. Many new investors make the mistake of exiting early due to short-term losses, which could be a bad way to go about bearish market swings.

Lastly, trying to always catch the bottom could be futile in a market as volatile as the crypto space. Sometimes, a bear market ends as soon as the bottom has been reached. In an aim to catch the bottom or buy the final dip, one may end up investing at a higher price when assets start to recover.

That said, in the end, it is undeniable that bear markets are slow and unpredictable and are usually influenced by many external factors such as economic growth, investor psychology, and world news or events.

While advice and recommendation about how to invest in bear markets are aplenty, it’s always crucial to DYOR (do your own research).

Bitcoin (BTC) Rebounds to $30,000 as Investors Ignore Gensler Warnings

Key Insights:

  • On Thursday, bitcoin (BTC) rallied by 5.63% to return to $30,000. The upside came despite the US equity markets seeing red.
  • SEC Chair Gary Gensler also failed to reverse early gains despite the warning of more coin collapses.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting at the 50-day EMA.

Bitcoin (BTC) rallied by 5.63% on Thursday, the breakout coming despite SEC Chair Gary Gensler’s warnings of more crypto pain. Reversing a 5.75% loss from Wednesday, bitcoin ended the day at $30,282.

A bullish session saw bitcoin strike a mid-afternoon high of $30,505 before easing back. Bitcoin broke through the First Major Resistance Level at $30,024 to test resistance at the 50-day EMA before ending the day at sub-$30,300.

Bearish sentiment from the US equity markets failed to hit the crypto market, with investors now looking beyond Terra LUNA and TerraUSD (UST).

SEC Chair Gary Gensler also failed to spook investors despite the warnings of more crypto failures.

On Thursday, Gensler talked of other cryptos mirroring Terra’s demise to harm investors. The SEC Chair didn’t predict a few failures but many.

The Bitcoin Fear & Greed Index Remains Deep in the Extreme Fear Zone

This morning, the Fear & Greed Index held steady at 13/100. While up from Tuesday’s 8/100, the Index remained in the “Extreme Fear” zone, reflecting the bearish sentiment across the crypto market.

Index holds steady despite BTC rally.
Fear & Greed 200522

Investors took little notice of the Index on Thursday. The bitcoin rally came despite the index sitting deep in the “Extreme Fear” zone, with the return to $30,000 having a muted impact on the Index this morning. Bitcoin and the broader market also ignored movements across the US equity markets.

The NASDAQ reversed gains from the session to end the day down 0.26%.

BTC correlation with the NASDAQ weakens.
BTC-NASDAQ correlation 200522 Daily Chart.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.48% to $30,138.

Bitcoin returns to $30,000 despite Gensler warnings.
BTCUSD 200522 Daily Chart

Technical Indicators

BTC will need to avoid the $29,812 pivot to target the First Major Resistance Level at $30,970.

BTC would need the broader crypto market to support a breakout from $30,500 levels.

An extended rally would test the Second Major Resistance Level at $31,666 and resistance at $32,000. The Third Major Resistance Level sits at $33,517.

A fall through the pivot would test the First Major Support Level at $29,122. Barring another extended sell-off, BTC should steer clear of sub-$28,000 levels. The Second Major Support Level sits at $27,964.

BTC shows resilience to Gensler warnings for now.
BTCUSD 200522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $30,365. This morning, the 50-day flattened on the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $32,500.

A BTC move through the 50-day EMA would bring $32,000 into play.
BTCUSD 200522 4 Hourly Chart.

Binance Coin (BNB) Finds Support in a Testy Morning Session

Key Insights:

  • Binance Coin (BNB) was up 4.15% to lead the crypto top ten majors in a choppy morning session.
  • Native coin to the Binance exchange, BNB has found strong support since falling to a May 12 current-year low of $206.62.
  • Technical indicators are still bearish for BNB, with BNB sitting below the 50-day.

On Wednesday, Binance Coin (BNB) slid by 6.06%. Reversing a 3.04% gain from Tuesday, BNB ended the day at $287.

Fed Chair Powell’s comments on monetary policy left BNB and the broader crypto market in the red.

Since the Wednesday pullback, crypto appetite has improved. Despite risk aversion plaguing the global equity markets for a second consecutive day, BNB found strong support through this morning’s session.

Binance Stays Ahead of Terra Collapse with Expansion Plans Unaffected

Last week, Binance was decisive in delisting TerraUSD (UST) and Terra LUNA. Unlike several other exchanges, Binance pre-warned users of a delisting should certain events prevail. The delisting took place shortly after a LUNA drop to below 0.005Tether (USDT).

Since the delisting, Binance moved on with its expansion plans that include a strategic move into Germany.

The Binance team was in Hamburg on Wednesday, networking with the crypto community attending Finance Forward.

Following the crypto events of last week, investors will be looking to draw a line in the sand. With the global equity markets at the mercy of the Fed, some will be hoping that today’s early breakout signals a decoupling from more traditional asset classes.

Binance Coin (BNB) Price Action

At the time of writing, BNB was up 4.15% to $299. A bullish start to the day saw BNB strike an early morning high of $302 before easing back.

The First Major Resistance Level at $302 pegged back BNB.

BNB on the move with an eye on $320.
BNBUSD 190522 Daily Chart

Technical Indicators

BNB will need to avoid the day’s $294 pivot to target the First Major Resistance Level at $302 for a second time. BNB would need broader crypto market support for a return to $300.

An extended rally would test the Second Major Resistance Level at $316 and resistance at $320. The Third Major Resistance Level sits at $337.

A fall through the pivot would bring the First Major Support Level at $280 into play. Barring another extended sell-off, BNB should avoid sub-$275. The Second Major Support Level sits at $272.

Avoiding the pivot will be key this afternoon.
BNBUSD 190522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (above), it is a bearish signal. BNB sits below the 50-day EMA, currently at $304. This morning, the 50-day EMA flattened on the 100-day EMA, providing support. The 100-day EMA fell back from the 200-day EMA; BNB price negative.

A move through the 50-day EMA would support a run at $320.

A move through the 50-day EMA would bring $320 into play.
BNBUSD 190522 4-Hourly Chart

How to Minimize Your Risks Investing in Stablecoins

The main idea of a stablecoin is to hedge your on-chain funds against the volatility of the cryptocurrency market. Stablecoins are pegged to fiat currencies, primarily to the U.S. dollar; and for this reason, their value stays stable in USD terms.

With the growing popularity of decentralized finance (DeFi), stablecoin holders have earned an opportunity to put their stablecoins to work and generate passive income off DeFi’s liquidity pools. Stablecoins are vastly used in the whole of the cryptocurrency market as a measure of dollar to trade genuine cryptocurrencies like ethereum or bitcoin, without having to resort to the fiat dollar.

This has drastically increased the usability of stablecoins in liquidity pools of decentralized exchanges (DEXes) where the value of cryptocurrencies and layer 2 tokens is largely established in USD-pegged stablecoins.

Lending pools on lending DeFi platforms like AAVE have also opened up new opportunities for income for stablecoin holders. There you can stake your stablecoins in a liquidity pool for an interest that varies depending on supply and demand.

If you are holding a cryptocurrency and a stablecoin, you can become a liquidity provider for the relevant trading pool on a decentralized exchange. You will be able to collect your trading fees in the LP tokens of that particular exchange and thus receive an APY on the otherwise idle liquidity locked in your stablecoins. The most prominent harbor of stablecoin liquidity is Ethereum’s Curve Protocol where you can capitalize on opportunities for profit with any stablecoins.

Things to factor in when investing in stablecoin

If you are looking to commit a share of your investment capital to stablecoins, please consider a few factors that will influence the security of your funds. The first parameter is the type of stablecoin. The most reliable ones are fiat-backed and overcollateralized.

The fiat-backed stablecoins are those that you can get for a fiat currency. An example of these stablecoins is Coinbase’s USD Coin (USDC). It functions on the principle of IOU: the issuer owes you the liquidity that you grant them in fiat money. This is a very reliable way to keep your liquidity safe while retaining the opportunity to use your on-chain liquidity on the respective blockchain for profit. One of the best-known overcollateralized stablecoin is Tether (USDT), which is over collateralized by fiat funds, securities, USD, etc

There are also algorithmic stablecoins backed with cryptocurrencies. There are different ways of their backing, for example, MakerDAO and its DAI utilize the mechanism of overbacking where the amount of collateral exceeds the amount of token issuance. It is over collateralized by Ether (ETH) locked in the MakerDAO smart contracts. Such a mechanism must be very reliable.

Most algorithmic stablecoins are algorithmically backed by the blockchain’s native cryptocurrency. This system is used in Terra’s UST stablecoin that is backed by LUNA – Terra’s native cryptocurrency. Its algorithm lets users burn 1 USD worth of LUNA to mint 1 UST and vice versa.

When the price of UST, for example, climbs to 1.01 USD, users can burn LUNA for UST and sell UST for USD with a profit of 0.01 USD per UST. This will increase the supply of UST and increase the LUNA supply to bring the UST price back to $1.

If the UST price falls below $1, for example, to $0.99, the algorithm allows users to buy 1 UST for 0.99 USD and burn it for 1 USD worth of LUNA, similarly getting a profit of 0.01 USD. This will reduce the supply of UST and increase the LUNA supply to bring the UST price back to $1.

However, this might fail to work. And it did fail in the rapid downfall of Terra’s UST to $0.29 and the more than 97% crash in LUNA’s price. The algorithm simply could not cope with the scale of the UST selloff and mint enough LUNA to back its price. And when the UST fell as much as it did, it required such a big additional supply of LUNA to recover its price back to $1 that it caused the price of LUNA to drop as much as it did.

This example shows how risky algorithmic stablecoins can be.

The other parameter to consider in choosing a stablecoin is decentralization. If a stablecoin is centrally issued it is very reliable, but it can get blocked due to legal issues if the governing entity gets into a fiscal jeopardy with regulators. Such a scenario can damage the price of the stablecoin. Besides, the money in the account of a holder must be transparent and legal otherwise it may also be blocked.

But there are also decentralized stablecoins that have no centralized control. They are backed by non-centrally issued cryptocurrencies locked in non-centrally controlled smart contracts. And that makes it practically challenging to devalue the price of such a stablecoin through any legal issues. It suits if investors have assets of ambiguous origin, but it’s worth keeping in mind the Luna story, which is decentralized.

The Tether USDT stablecoin is the most prominent example of a centrally issued stablecoin. In April Tether Holdings Ltd. unveiled more details on its reserves, which confirmed their validity.

So, which stablecoins to go for?

In order to hedge your funds securely against cryptocurrencies’ volatility, it will be best to put your liquidity into several stablecoins on various blockchains. For example, the BUSD stablecoin can allow you to generate an APY on the largest DEX on Binance Smart Chain – Pancakeswap – while USDC and USDT can allow you to make use of demand for stablecoin liquidity on the Ethereum blockchain.

I would also advise going for non-centrally-issued stablecoins, for example, DAI, and try to abstain from investing large portions of your capital into stablecoins that lack proper backing.

And if you are dealing with chunky sums of money, it will be best for you to do your own research before committing your funds to one or another stablecoin rather than buy them rashly. Having a good understanding of how a stablecoin’s price is regulated will already allow you to have a notion of how securely your funds are stored and not be worried about their safety.

Dmitry Mishunin, the founder and CEO of a a DeFi security and analytics company HashEx

PSG Fan Token Surges by 65% as Socios Fan Tokens Buck the Market Trend

Key Insights:

  • French footballing giants Paris Saint-Germain (PSG) saw its fan token surge by 65% on Wednesday.
  • Support for Socios Fan Tokens kicked in on Chili network news updates and listings on Bitpanda.
  • The Socios fan token platform offers forty fan tokens of international football clubs.

PSG Fan Token grabbed the limelight on Wednesday, supported by BitPanda and Chiliz (CHZ) news. In recent weeks, movement across the forty Socios fan tokens has more closely reflected fan sentiment towards team performance and the club.

The European football season is drawing to a nail-biting end, with the English Premier League and Italy’s Serie A yet to have a clear winner.

For the French top flight Ligue 1, star-studded Paris Saint-Germain (PSG) sits an impressive 15 points ahead with one game remaining.

According to CoinGecko, the Paris Saint-Germain leapfrogged Manchester City Fan Token (CITY) to the top of the Fan Token table on Wednesday.

In 7-days, Paris Saint-Germain has surged 132.5% to a market cap of $33.08m, 82% of that came in the last 24-hours.

By contrast, Manchester City Fan Token is up a modest 56.3% to sit at #2, with a market cap of $25.21m.

PSG Jumps to top of table on Bitpanda listing news.
MarketCap Table 19/05

Socios Fan Tokens Get an End of Season Boost

This week, the stars were aligned for football Fan Token holders, with Fan Tokens on a breakout amidst a broader crypto market sell-off.

On Tuesday, Chiliz announced the launch of Scoville Testnet Phase 2. Key feature enhancements include the launch of PepperSwap, a decentralized exchange (DEX), and Fan Token Test Surveys.

For football clubs and fans, the Fan Token Test Survey delivers a mouth-watering prospect. The ultimate goal is for Fan Token holders to vote on club decisions.

 

Last week, Chiliz announced a Head2Head Burn. Head2Head Burn reduces the supply of fan tokens depending on goals scored and the outcome of games.

The introduction of the Head2Head Burn competition means that better-performing teams will see more fan tokens burned. This would push fan token prices upwards, rewarding fan token holders.

The announcement had a muted impact on Fan Token price action, however, as the broader market grappled with the collapse of TerraUSD (UST) and Terra LUNA.

It wasn’t just network news that provided a boost, however.

Bitpanda Announces the Listing of Seven Socios Fan Tokens

For Ligue 1 winners, PSG, fans received the bonus of BitPanda announcing the token listing on Wednesday.

BitPanda also listed Juventus Fan Token (JUV), Atletico De Madrid Fan Token (ATM), Santos FC Fan Token (SANTOS), FC Porto Fan Token (PORTO), FC Barcelona Fan Token (BAR), and Manchester City Fan Token.

Behind PSG, Juve and Santos fans were most responsive, with the fan tokens up 57% and 47% over 24-hours.

Increased fan engagement through the Chiliz network enhancements and BitPanda’s announcement put Fan Tokens in the limelight amidst the crypto market doom and gloom.

Socios Fan Tokens Drive Fan Engagement in the World of Soccer

There are currently forty fan tokens of international clubs under Socios. The fan tokens give holders a say in a club’s decision-making, rewards, and access to exclusive fan token holder promotions, games, chats, and a chance to become a superfan.

Socios fan tokens are on the Chiliz Chain, a Proof-of-Authority Ethereum-based sidechain.

Other teams under Socios include the English Premier League’s Arsenal and Everton and even the Argentinian National Football team.

PSG Price Action

At the time of writing, PSG was down 1.44% to $9.6050. A bullish start to the day saw PSG jump to an early high of $11.55 before hitting reverse.

A move back through to $10.00 levels would signal another breakout day ahead. Near-term, the bulls will be eyeing a run at April’s high of $15.8575.

A PSG return to $10 would signal another breakout on the Chiliz and Bitpanda news.
PSG 190522 Daily Chart

Crypto Update – Markets Wobbled Could Tether (USDT) Collapse Next

Terra Luna‘s collapse was a stunning right hook to crypto; markets are staggered. Tether’s market cap plunged 10% in May – Will horrified investors continue to cash out? Tether accounts for nearly 25% of ALL trading volume, as I understand it. What happens if prices de-peg like UST?

Stablecoin Collapse (Terra Luna)

Highly leveraged assets, like crypto, retreat quickly when liquidity vanishes from the market. Something like $200 billion in “paper gains” evaporated last week, according to Bloomberg. Terra Luna’s market cap plunged $40-billion from the April peak.

Graphical user interface, chart Description automatically generated

Source: Coinmarketcap

Tether (USDT) Risk

I’ve heard ample evidence supporting possible fraud in stable coin USDT (Tether).

By some, Tether has been described as a massive Ponzi scheme, bigger than Madoff.

As with all Ponzi schemes, they work great as prices rise, and only fail when customers ask for their money back. Is a meltdown in Tether (USDT) next?

Tether Peg

Tether lost its peg as redemptions spiked (see below). Was that a one-time event or just the beginning salvo?

On May 12th, Tether lost its peg (dipped to .95) briefly as $3-billion of redemptions slammed dealers.

Source: CoinmarketcapGraphical user interface, application Description automatically generated

Source: Coinmarketcap

Tether Market Cap

The market cap of USDT plunged $10 billion during the month of May. If redemptions continue at this pace and Tether can’t meet them, we could see a nuclear winter in crypto.  Graphical user interface, chart, line chart Description automatically generated

Source: Coinmarketcap

BTC/USD Price Forecast

Bitcoin may be producing a bear flag just above the $28,000 level. Breaking below $28,000 this week could trigger a second down leg. To support a rebound, prices need to close above $32,000. Otherwise, this looks like a pause before heading lower.

Chart Description automatically generated

Note- Sometime this year I see bitcoin dropping to $12,500, possibly soon if Tether de-pegs.

Takeaway

Crypto investors need to watch Tether’s like a hawk. I see much more downside ahead.

Longer-term I’m bullish blockchain technology and in particular Cardano (ADA).

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

Algorand (ALGO) Sees Red Despite a Recent Flurry of Bullish Activity

Key Insights:

  • It was a bearish morning session, with ALGO joining the broader crypto market in the red.
  • While bullish news updates have limited the losses, ALGO has been at the mercy of the broader market and sentiment toward Fed monetary policy.
  • ALGO’s technical indicators are bearish, with ALGO sitting below the 50-day EMA.

On Tuesday, Algorand (ALGO) rallied by 7.48%, supported by news of a LimeWire-Universal Music Group Partnership. Reversing a 6.20% loss from Monday, ALGO ended the day at $0.4945.

Bullish sentiment from across the broader market supported the Tuesday breakout session, with resistance at $0.50 limiting the upside on the day.

Sentiment towards inflation, the threat of a recession, and Fed monetary policy are market negatives, however.

Overnight, Fed Chair Powell delivered a hawkish stance on monetary policy that has pressured the crypto market this morning. Powell’s comments have also overshadowed bullish Algorand-related news updates.

Universal Music Group Goes NFT on Algorand Marketplace

On Tuesday, LimeWire signed a deal with Universal Music Group (UMG) to open the LimeWire collectibles marketplace to Universal Music Group Artists.

According to the announcement,

“UMG artists can now offer audio recordings, audiovisual content, backstage footage, and any artwork and images as NFTs on the LimeWire marketplace and sell them directly to fans and collectors.”

LimeWire will collaborate with UMG on making “digital music collectibles accessible to a wider audience.”

The announcement went on to say,

“As part of this partnership, UMG will provide licenses that will allow LimeWire to partner with UMG artists to launch innovative music-based NFT projects utilizing the LimeWire marketplace.”

LimeWire will launch the NFT marketplace on Algorand.

Last week, Hivemind Capital and Algorand announced the acquisition of the music platform, Napster.

The latest music industry news follows FIFA announcing Algorand as an official partner ahead of this year’s FIFA World Cup in Qatar.

ALGO struck a May high of $0.7842 in response to the FIFA news before tumbling to a May 12 and current year low of $0.3412.

Last week, the collapse of TerraUSD (UST) and Terra LUNA sank the crypto market to 2022 lows.

ALGO Price Action

At the time of writing, ALGO was down by 3.88% to $0.4753. A mixed start to the day saw ALGO rise to a morning high of $0.5038 before falling to a low of $0.4717.

ALGO sees early losses.
ALGOUSD 180522 Daily Chart

Technical Indicators

ALGO will need to move through the day’s $0.4870 pivot to target the First Major Resistance Level at $0.5154. ALGO would need broader market support to breakout from this morning’s high of $0.5038.

In the event of an extended rally, ALGO could test the Second Major Resistance Level at $0.5362 and resistance at $0.54. The Third Major Resistance Level sits at $0.5854.

Failure to move through the pivot would bring the First Major Support Level at $0.4662 into play. Barring an extended sell-off, ALGO should avoid sub-$0.46. The Second Major Support Level sits at $0.4379.

A return to $0.50 would support an ALGO breakout.
ALGOUSD 180522 Hourly Chart.

Looking at the EMAs and the 4-hourly candlestick chart (below), the signal is bearish. ALGO sits below the 50-day EMA, currently at $0.4986. This morning, the 50-day EMA pulled back from the 100-day EMA. The 100-day EMA eased back from the 200-day EMA; ALGO price negative.

A move through the 50-day EMA to $0.51 would support a run at $0.54.

UMG - LimeWire deal supports a run at $0.54.
ALGOUSD 180522 4 Hourly Chart.

Recent Terra Ecosystem Collapse Draws G7 to Discuss Crypto Regulation

Key Insights:

  • G7 countries to discuss further crypto regulations following Terra’s failure.
  • French central bank head called the recent crypto crash a “wake-up call” for global regulators.
  • Other nations like South Korea have already started investigating cryptos following the incident.

The Group of Seven (G7) countries would place global crypto regulations under high priority in the upcoming meeting in Germany. 

Finance ministers and central bankers would join the meeting in the German cities of Bonn and Königswinter, starting Wednesday. G7 countries include the United States, Canada, Japan, Germany, France, Italy, and the United Kingdom.

Terra ecosystem downfall alerts regulators worldwide

Per a Reuters report, French central bank head Francois Villeroy de Galhau said Tuesday that officials from G7 countries would likely discuss crypto regulations this week.

Speaking at an emerging markets conference in Paris, he called the recent crypto market fluctuations caused by Terra (LUNA) and TerraUSD (UST) a “wake-up call.” He noted that the turbulence has led to “the urgent need for global regulation.”

“Europe paved the way with MICA (regulatory framework for crypto-assets), we will probably discuss these issues among many others at the G7 meeting in Germany this week.”

The G7 officials started discussions on crypto regulations in December 2020. However, the discussions focused on their use for malign purposes and illicit activities and the prospects of central bank digital currencies (CBDCs).

Francois said that the “disorderly development of crypto-assets” and the “misnamed stablecoins” pose risk of fragmentation in the financial system. Calling those “very unstable,” he added,

“Crypto assets could disrupt the international financial system if they are not regulated, overseen, and interoperable in a consistent and appropriate manner across jurisdictions.”

Global regulators conduct urgent crypto “trend check”

Financial regulators worldwide are initiating investigations on crypto price trend due to recent events that shook the entire crypto industry.

For instance, South Korean financial authorities launched an emergency check on crypto trends. They enacted the “Basic Act on Digital Assets” that includes consumer protection under such high price volatility circumstances.’

As reported by Yonhap News, a South Korean financial authority said,

“We are monitoring the overall situation and checking trends in relation to the Luna incident. But there is no means for the government to respond immediately.”

Additionally, Yun Chang-Hyun, a representative from ruling People Power Party, has necessitated a parliamentary hearing of Terra founder Do Kwon.

Bitcoin (BTC) Remains Under Pressure Despite a Bullish Tuesday Session

Key Insights:

  • On Tuesday, bitcoin (BTC) rose by 1.93% to end the day at $30,416. Resistance at $31,000 continued to be the key resistance level.
  • The upside came despite the Bitcoin Fear & Greed Index falling to 8/100, the lowest level since a March 14, 2020 low of 8/100.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 50-day EMA.

The NASDAQ supported a bitcoin (BTC) rise of 1.93% on Tuesday. Partially reversing a 4.66% slide from Monday, bitcoin ended the day at $30,416.

A mixed session saw bitcoin rise to a day high of $30,744 before hitting reverse.

Falling short of $31,000 and Monday’s high of $31,296, bitcoin eased back to sub-$30,500.

The upside came despite bearish sentiment lingering from the TerraUSD (UST) and Terra LUNA meltdowns of last week.

Throughout the day, the NASDAQ 100 mini delivered support ahead of upbeat stats from the US that were also positive for riskier assets.

Several key drivers are currently in play to test investor appetite. These include the threat of a shift in the regulatory landscape, the fear of a recession, Fed monetary policy, and the risk of another stablecoin collapse.

The Bitcoin Fear & Greed Index Recovers from a 2022 Low of 8/100

This morning, the Fear & Greed Index rose from 8/100 to 12/100. While recovering from the lowest level since March 14, 2020, the Index remained deep in the “Extreme Fear” zone, reflecting the bearish sentiment across the crypto market.

BTC Fear & Greed Index climbs after a fall to 8/100.
Fear & Greed Index

While the demise of Terra LUNA and TerraUSD led to a weaker correlation between the NASDAQ 100 and bitcoin, a correlation remains in place.

Bitcoin also responded to upbeat US retail sales and industrial production figures before easing back.

Bitcoin finds NASDAQ support.
BTCNASDAQ Daily Chart 1805

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.83% to $30,162.

A mixed start to the day saw bitcoin rise to an early morning high of $30,674 before falling to a low of $30,158.

Bitcoin found NASDAQ support on Tuesday.
BTCUSD 180522 Daily Chart

Technical Indicators

BTC will need to move through the $30,192 pivot to target the First Major Resistance Level at $30,969.

BTC would need the broader crypto market to support a breakout from Tuesday’s high of $30,744.

An extended rally would test the Second Major Resistance Level at $31,510 and resistance at $32,000. The Third Major Resistance Level sits at $32,816.

Failure to move through the pivot would test the First Major Support Level at $29,651. Barring another extended sell-off, BTC should steer clear of sub-$28,500 levels. The Second Major Support Level at $28,885 should limit the downside.

BTC struggles at $30,500.
BTCUSD 180522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $30,837. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $35,000.

A move through the 50-day would support a run at $35,000.
BTCUSD 180522 4 Hourly Chart.

Crypto Market Daily Highlights – May 17

Key Insights:

  • The global crypto market cap is back above the $1.3trillion mark. 
  • BTC’s price has tested the $30,300 resistance. 
  • Both bullish and bearish news is driving market volatility higher.

 The larger cryptocurrency market has been rangebound for most of this month, as the global crypto market cap oscillated between the $1.2 trillion low and $1.34 trillion. 

Data from Coin Market Cap top 100 suggested that Kadena (KDA) jumped by 14.70%, and Algorand (ALGO) saw 11% daily gains leading market the crypto majors. 

It has been an eventful 24 hours for the crypto market, with BTC jumping back above the $30,000 mark and several altcoins in the top 100 making gains. Sustained gains, however, still remain in question as the market continues to be volatile. 

BTC risks falling to $20,000

According to some market experts, BTC’s chances of revisiting the lower levels are still high. The Luna Foundation Guard (LFG) recently revealed that it had sold almost all of its BTC reserves during last week’s Terra (LUNA) and TerraUSD meltdown. The higher amount of circulation BTC in the market added to price volatility. 

Famous trader Phoenix said in a recent Twitter post that if bitcoin’s price falls below the $29,494 mark, the next price range to watch would be $21,800-23,800. 

As highlighted in an FXEmpire article earlier this morning, the Bitcoin Fear & Greed Index fell from 10/100 to 8/100, its lowest level since March 14, 2020. 

The early-week BTC losses witnessed this week could be blamed on global investors in the equity markets and the crypto market responding to dire economic data from China.

Despite short-term price gains, weak technical signals and low buying pressure left bitcoin’s price in a rangebound movement. That said, in the traditional market, weak stats coupled with the threat of a recession left the NASDAQ 100 down 1.20%.

Even though Federal Reserve chair Jerome Powell’s assurances on the rate hike front have delivered support, the same has failed to change the larger economic outlook. Furthermore, the correlation between bitcoin and the NASDAQ strengthened marginally on Monday.

On a one-day chart, BTC’s price made some positive progress; however, high gains didn’t seem to be on bitcoin’s cards as RSI highlighted high selling pressure in the market. 

FXempire, BTC, Crypto, Bitcoin
BTC 1-day price | Source: FXEmpire

Analyst Rekt Capital pointed out that the $20,000 zone is an area of interest should current levels fail to hold and buyers not materialize.

LUNA and UST Debacle Continues

The South Korean Conservative Party has requested a parliamentary hearing on the dramatic fall of Terra’s LUNA and its algorithmic stablecoin UST. 

On Tuesday, the South Korean National Assembly’s Political Affairs Committee summoned Terraform Labs co-founder Do Kwon for a parliamentary hearing regarding the issue. The committee’s representative, People’s Power’s Yoon Chang-Hyeon, said,

“There is a part that raises questions about the behavior of exchanges during the crash. Coinone, Korbit, and Gopax stopped trading on May 10, Bithumb on May 11 stopped trading daily, but Upbit did not stop trading until May 13.”

However, amid the negative commentary, TerraUSD’s price managed to register 11.83% gains trading at $0.1216 at the time of writing. 

High Volatility Sends Altcoin Prices Up

A recent Santiment report highlighted that for those ‘expecting less volatility for crypto markets in the first weeks of May after the rocky first four months of 2022, a continued pattern of downswings shook even crypto’s optimistic traders to their cores.’

After the second FOMC meeting that resulted in the US Fed increasing interest rates by another 0.5%, crypto markets showed some life for 24 hours. At press time, some of the top gainers were altcoins like Elrond (EGLD), Kava (KAVA), Aave (AAVE), and Kadena (KDA)

Algorand (ALGO) also gained close to 7.82% as the token traded at $0.49 at the time of writing. On the other hand, BAYC’s ApeCoin (APE) also noted 7% gains, trading at $8.73. 

Interestingly, Litecoin’s price saw a bounce of over 6% in the last 24-hours as it traded at $70.83. 

One of the most interesting news came from China, as bitcoin mining was back in the news this week, with new data showing China as the second-largest bitcoin mining nation, despite an outright ban.

A recent, FXEmpire article also highlighted that the world’s largest digital currency asset manager, Grayscale, confirmed that it would be bringing its first European ETF called the Grayscale Future of Finance UCITS ETF (GFOF).

Thus, with both bullish and bearish developments taking place in the crypto market, volatility could continue to push BTC and the global crypto market’s boat in the near term. 

Second Terra Ecosystem Revival Plan Proposes “Luna Classic” Hard Fork

Key Insights:

  • Do Kwon has proposed a hard fork to split the existing blockchain.
  • The old chain will be called ‘Terra Classic’ with the ‘Luna Classic’ token.
  • A billion new Luna tokens will be airdropped to stakers and developers if approved.

On May 17, the founder of the troubled Terra Luna network, Do Kwon, announced his latest plans to revive the beleaguered blockchain. He kicked it off by declaring that Terra is more than just UST – the dollar-pegged stablecoin which collapsed last week.

His first proposal, which involved redistributing LUNA tokens and abandoning the UST stablecoin, was hotly debated and contested by many. This has led to a second proposal also involving forking or splitting the existing blockchain, but with a few differences.

Forking a New Future

Terraform Labs will put forth a new governance proposal on May 18 to fork the existing blockchain. It involves creating a new chain from the fork without the algorithmic stablecoin. The old chain would be called Terra Classic with the token Luna Classic (LUNC), and the new chain is to be called Terra with the LUNA token.

The new LUNA tokens will be airdropped to Luna Classic stakers holders, residual UST holders, and developers of the previous incarnation of the Terra network.

A large portion of the token distribution will be allocated to “providing an emergency runway for existing Terra dapp developers” and “aligning the interest of developers with the long-term success of the ecosystem.”

One billion new Luna tokens will be created and distributed, with a quarter going to the community pool controlled by staked governance and another quarter to UST holders at a snapshot taken at launch on May 27.

35% will be distributed to LUNA stakers using a “pre-attack” snapshot from just before the system collapsed on May 7, and 10% will go to LUNA holders. The rest will be split between ecosystem developers.

Do Kwon admitted that competing interests made it difficult to agree on a way forward. Competing interests from varied stakeholders such as LUNA and UST holders, and Terra builders, make it “extremely difficult and unlikely to achieve consensus on a cohesive, congruent plan,” he stated before adding:

“It would be devastating for broader crypto adoption and advancement if we remain in entropy amidst opposing views,”

The existing ecosystem is built on a principle of supply and demand whereby LUNA is minted and destroyed to redeem UST. This works well when there is demand and prices are increasing, but a massive liquidation from DeFi protocols offering huge returns on stablecoin staking resulted in the eventual downfall of the system.

UST and LUNA Price Updates

LUNA, which was trading at over $65 last week, is currently next to worthless at around $0.00019. The dollar-pegged UST stablecoin, once the world’s third-largest with a market capitalization of $18 billion, has collapsed to $0.11.

Terra’s $3.5 billion Bitcoin treasury was moved to exchanges last week, as reported by FXEmpire. Meanwhile, global bankers, regulators, and politicians have had an early Christmas with this fiasco as it has given them the perfect excuse to clamp down on the crypto industry and impose tighter controls.

UK Treasury to Selectively Legalize Stablecoins as a Means of Payment

Key Insights:

  • UK Treasury set to legalize stablecoins as a means of payment despite the TerraUSD (UST) collapse.
  • In the wake of the UST collapse, the Treasury plans to legalize fully-backed stablecoins such as Tether (USDT) and USD Coin (USDC).
  • The UK government is looking to drive innovation while other jurisdictions continue to hinder growth in the space.

In April, UK Economic Secretary John Glen announced plans to include stablecoins as a means of payment.

Taking to Twitter, Glen said,

“This places the UK financial services sector at the forefront of technology, creating conditions for stablecoin issuers and service providers to operate and invest.”

Since the April announcement, the Queen gave stablecoins her blessing during the Queen’s Speech at the House of Lords.

Speaking on behalf of the Queen, Prince Charles delivered support for plans to legalize stablecoins as a means of payment.

UK Treasury To Legalize Stablecoins as a Means of Payment

According to a report from the weekend, the UK Treasury plans to legalize stablecoins as a form of payment.

Chancellor Rishi Sunak said it will,

“Ensure the UK financial services industry is always at the forefront of technology and innovation.”

A UK Treasury spokesperson said,

“Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill, which was announced in the Queen’s speech.”

The news followed a tumultuous week for stablecoins and the crypto market. Stablecoin TerraUSD (UST) saw its dollar peg shatter, with UST falling to a week low of $0.0437 before steadying.

UST to be excluded from Treasury legislation.
USTUSD 160522 Daily Chart

The meltdown left Terra LUNA at close to zero, with $500 billion wiped off the total crypto market cap before support kicked in.

One key difference, however, is government plans to legalize stablecoins fully backed by currency and other liquid asset reserves.  These include Tether (USDT) and USD Coin (USDC).

Stablecoin TerraUSD links to Terra LUNA via an algorithm that failed, leading to a collapse in both.

While TerraUSD and Terra LUNA grabbed the headlines last week, Tether also added to the market stress.

On Thursday, Tether fell to a day low of $0.9511 before returning to close to dollar parity. The fall from parity drove fears of another stablecoin collapse before returning to $0.99 levels. Tether saw a similar move on Sunday, falling to a week low of $0.9408 before steadying.

The markets were less concerned with Sunday’s fall, however,  which was modest compared with a February 28 current-year low of $0.8679.

Treasury to approval USDT as means of payment
USDTUSD 160522 Daily Chart

While the UK looks to legalize stablecoins as a means of payment, US lawmakers appear divided.

US Treasury Secretary Yellen Calls for More Regulatory Oversight

Amidst the crypto market turmoil of last week, US lawmakers delivered a different message on the crypto front.

US Treasury Secretary Janet Yellen called for crypto regulations while noting that dollar-pegged stablecoins have yet to reach a scale “where they’re financial stability concerns.”

SEC Chair Gary Gensler took the opportunity to lay claim on the crypto market rather than support innovation.

As governments and regulators grapple with the need for regulatory oversight and to support innovation, some are more ahead of the curve than others.

Dubai is one jurisdiction that has taken the lead in supporting innovation in the digital space. Earlier this month, Dubai’s virtual assets regulator became the first to enter the Metaverse with a virtual HQ.

Your Crypto Brew: Bitcoin Dips Back Under $30,000 Amid China Growth Fears

Key Takeaways

  • After a positive weekend, cryptocurrency markets are giving back some gains on Monday, with BTC/USD back under $30,000. 
  • Weak Chinese data over the weekend have put fears about slowing global growth in the limelight.
  • US Retail Sales data and Fed Chair Powell’s speech, both Tuesday, will be key events for crypto markets this week.

State Of The Market

Cryptocurrency markets are seeing broad weakness at the start of the week following a weekend of stabilization. The total market capitalization of cryptocurrencies rallied to as much as $1.344 trillion on Sunday, up nearly 25% at the time from last Thursday’s multi-month lows under $1.1 trillion.

After closing out Sunday trade in the green for a third successive session, the longest positive run since March, the total market capitalization of cryptocurrencies has fallen a little more than 5.0% on Monday to around $1.26 trillion.

Data released out of China over the weekend showed steep declines in the YoY growth rates of both the nation’s Industrial Output and Retail Sales in April. Recent economic weakness in China comes as the country implements harsh lockdowns across major cities including financial hub Shanghai and the capital Beijing in order to contain the spread of Covid-19.

The latest data out of China, the world’s second-largest economy, highlights increased concerns investors have been having about slowing global growth as of late. These concerns, alongside concerns about central bank tightening, have weighed heavily on risk-sensitive assets such as equities and crypto in recent weeks.

Growth worries and central bank tightening fears will remain in focus this week with the release of April US Retail Sales figures followed by remarks from US Federal Reserve Chair Jerome Powell on Tuesday.

Markets expect the Fed to implement further 50 bps rate hikes at its next few meetings as it seeks to bring rates to a more neutral level amid persistently elevated US inflation. Against the backdrop of concerns about growth and tighter monetary policy, rallies in cryptocurrency markets may remain subject to being sold.

Bitcoin, Ethereum, Altcoins

In tandem with the recent swing in cryptocurrency market sentiment, bitcoin is back to trading just below $30,000 on Monday, down nearly 5.0% on the day, having rallied as high as $31,400 on Sunday. At current levels of around $29,000 per token, bitcoin’s market cap is around $570 billion, and its crypto market dominance is around 44.5%.

Similarly, ethereum is back to trading near the $2,000 per token level having gone as high as the upper $2,100s over the weekend. At current levels, its market cap is around $245 billion, and its crypto market dominance is around 19.3%.

Price action across most of the rest of the other non-stable coin cryptocurrencies in the top ten has been similar to that of bitcoin and ethereum over the past few days. On Monday, Ripple’s XRP was last trading lower by about 6.0% around $0.40 per token, and Binance’s BNB was last down around 5% and back to just below $300 per token.

Cardano’s ADA was last down about 4.5% to around $0.57 per token and Solana’s SOL was down just under 8.0% to around $54 per token. Popular meme coin DOGE was last down about 6.0% to just under $0.09 per token.

DeFi, NFTs

After last week’s LUNA-led rout that saw the market of major DeFi tokens collapse from near $100 billion to lows around $50 billion, sentiment has stabilized since the weekend. The market cap of major DeFi tokens is currently around $56 billion, little changed since Sunday.

In terms of the latest news regarding Terra’s LUNA, the market cap of the token native to Terra’s blockchain went as high as $3.0 billion over the weekend but has since dropped back to around $1.4 billion.

Ethereum founder Vitalik Buterin said he strongly supports a plan that would deliver “coordinated sympathy and relief for the average UST smallholder who got told something dumb about “20% interest rates on the US dollar” by an influencer, personal responsibility and SFYL for the wealthy”.

Meanwhile, questions have been rising about what happened to the Luna Foundation Guard’s (LFG) bitcoin reserves, with $1.2 billion reportedly still unaccounted for. The LFG is a non-profit set up to support the development of the Terra ecosystem and had been building a large bitcoin reserve to help back UST.

Separately, over the weekend a Bored Ape Yacht Club non-fungible token (NFT) worth over $200,000 was mistakenly sold for $200. Some speculated the sale could actually have been for tax evasion/avoidance.

Exchange Flows

According to Glassnode data, last week saw $19.4 billion worth of bitcoin flow into cryptocurrency exchange wallets versus $17.9 billion flow out. The net inflow to exchanges was thus around $1.5 billion worth of bitcoin, which isn’t too surprising given last week’s volatile/bearish conditions.

In times of crypto market stress, it’s not unusual to see investors moving their crypto into their exchange wallets so they can sell.

Last week also saw a net inflow of around $979.5 million ethereum and $3.8 billion USDT (Tether USD) into exchange wallets.

In terms of exchange flows on Sunday, bitcoin saw a net outflow of just under $70 million, ethereum saw a net inflow of just under $50 million and USDT saw a net inflow of just over $70 million.

Crypto Adoption

Major global investment banks Goldman Sachs and Barclays invested in a $70 million funding round for Elwood Technologies, a crypto trading/portfolio management software company, marking a new bet on the longevity of the crypto space.

Meanwhile, reports over the weekend suggest that Japanese bank SIB Holdings will buy a 51% stake in crypto trading platform BITpoint Japan.

Grayscale Investments just listed its first exchange-traded fund (ETF) in Europe. The Future of Finance UCITS ETF will list on the London Stock Exchange, German Börse, and Italian Borsa Italiana and will offer investors exposure to companies including PayPal, Coinbase Global, Block, Robinhood Markets, and Argo Blockchain.

Finally, the CEO of major crypto exchange FTX Sam Bankman-Fried said that he doesn’t think bitcoin has a future as a payments system, but that it does have potential as a store of value.

Regulatory Landscape

The UK government on Monday confirmed that they will regulate stablecoins following the LUNA and UST collapse. They reportedly do not have any problem with stablecoins, so long as they aren’t algorithmic (like UST was).

Reports over the weekend suggest that South Korea is to launch an emergency review of cryptocurrencies in wake of the LUNA and UST crashes.

“32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout and its benefits in our country”, El Salvador President Nayib Bukele tweeted on Monday. The meeting will take place on Tuesday.

Officials at India’s central bank warned a key parliamentary finance panel that the adoption of crypto in the country could result in the “dollarization” of the Indian economy and reiterated their recommendation for a complete ban. India may also soon ban crypto celebrity endorsements.

Finally, the Securities and Exchange Commission of Nigeria said in a new rulebook published over the weekend that all digital assets represent either an asset such as a debt or equity claim on the issuer, thus by default fall under their regulatory purview.

Has Bitcoin Reached the Bottom?

Bitcoin Price Action and Trading Strategy

Bitcoin is down 9.4% over the past week, ending at around $31,000. Ethereum lost 16.1%, while other leading altcoins in the top 10 fell from 13.9% (Binance Coin) to 25.4% (Solana). The total capitalisation of the crypto market, according to CoinMarketCap, sank 15% over the week to $1.30 trillion.

The bitcoin dominance index jumped 2.9 points to 44.4% over the same period due to a sharp weakening of altcoins. The cryptocurrency fear and greed index fell 8 points in the week to 10 and continues to be in “extreme fear”. By Monday, the index had climbed to 14 points, thanks to the cryptocurrency market’s retreat from local lows at the end of last week. Bitcoin has declined for six weeks in a row, along with stock indices.

A prolonged one-way move in Bitcoin was last seen in late 2018 when the first cryptocurrency hit a cyclical bottom. That was followed by many more months of sluggish momentum, so investors have an essential question: choose a low point to buy or join the move when it is certain. Prudence suggests that it is less risky to follow the second strategy.

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Luna Crash and Raul Pal Crypto Market Forecast

Last week’s decline intensified after breaking through last year’s lows near $30,000, becoming the most significant weekly drop since January. The story of the Terra (LUNA) crash and the TerraUSD stablecoin project added to the negativity on the crypto market, hitting all altcoins hard. According to Global Macro Investor CEO Raul Pal, May and June will be the most worrying months, so a new wave of sell-offs in the crypto market is inevitable.

Bill Miller and Robert Kiyosaki Points of View

Legendary investor Bill Miller said he sold some of his BTC holdings. Although bitcoin may continue to decline in the short term and even drop by half from current levels, Miller looks at bitcoin positively and expects it to grow over a long time. Robert Kiyosaki, the world-famous author of the bestselling book Rich Daddy, Poor Daddy, is looking to buy bitcoin once it tests the ‘bottom’ at $17,000. The businessman has once again expressed distrust of the US government.

by FxPro’s Senior Market Analyst Alex Kuptsikevich.

Bitcoin (BTC) Falls Back to $30,000 as Regulators Call for Action

Key Insights:

  • On Sunday, Bitcoin (BTC) rose for a third consecutive day to end the week down 8%. It was a seventh consecutive week in the red.
  • While the markets moved on from the TerraUSD and Terra LUNA collapse, there was no major breakout, with regulatory uncertainty returning to the market.
  • Bitcoin (BTC) technical indicators flash red, with bitcoin sitting below the 50-day EMA.

Bitcoin (BTC) rose by 4.15% on Sunday. Following a 2.75% gain on Saturday, bitcoin ended the week down 8% to $31,296.

Investor angst over the TerraUSD (UST) and Terra LUNA eased going into the weekend. Bitcoin tested resistance at the 50-day EMA before a pullback this morning.

While market angst over the Terra collapse eased, increased regulatory chatter is testing investor sentiment.

Regulators React to the UST De-pegging and LUNA Collapse

This week, lawmakers in South Korea talked of the need to expedite the enactment of crypto laws, while looking to consider how other major jurisdictions rollout virtual crypto regulations.

South Korea’s Digital Asset Basic Act is reportedly aimed at protecting investors and is due for enactment next year, with implementation in 2024.

Last week, US Treasury Secretary Janet Yellen and SEC Chair Gary Gensler were vocal on the need for crypto regulations. While Yellen called for crypto regulations, Gensler took the opportunity to, once more, lay claim on the crypto market.

With all eyes on the SEC v Ripple (XRP) case, the issue of whether or not cryptos are securities remains hotly debated.

This Wednesday, the SEC is due to reply to Ripple’s response to the SEC brief attempting to shield William Hinman documents related to a famous 2018 speech.

Hinman said that bitcoin (BTC) and ether (ETH) are not securities in a 2018 speech.

The threat of increased regulatory oversight is just another thing that crypto investors will need to consider.

Other risks include Fed monetary policy and the market fear of a recession that has led to a greater correlation between bitcoin and the NASDAQ.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 3.25% to $30,279.

A bullish start to the day saw bitcoin rise to a morning high of $31,298 before falling to a low of $30,177. Resistance at the 50-day EMA pegged bitcoin back this morning.

Bitcoin struggles this morning.
BTCUSD 160522 Daily Chart

Technical Indicators

BTC will need to move through the $30,721 pivot to target the First Major Resistance Level at $31,985 and resistance at $32,000.

BTC would need the broader crypto market to support a return to $31,000.

An extended rally would test the Second Major Resistance Level at $32,665 and resistance at $33,000. The Third Major Resistance Level sits at $34,608.

Failure to move through the pivot would test the First Major Support Level at $30,040 and support at $30,000. Barring another extended sell-off, BTC should steer clear of sub-$29,000 levels. The Second Major Support Level sits at $28,777.

Bitcoin struggles as the threat of new regs rises.
BTCUSD 160522 Hourly Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal. BTC sits below the 50-day EMA, currently at $31,339. This morning, the 50-day pulled back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA; BTC negative.

A move through the 50-day EMA would support a run at $35,000.

Bitcoin fails to break out from the 50-day EMA.
BTCUSD 160522 4 Hourly ChartBitc

Blockchain Analytics Firm Tracks Terra BTC Treasury to Major Exchanges

Key Insights:

  • More than 80,000 BTC was sent to Binance and Gemini after the Terra collapse.
  • It remains to be seen whether the Bitcoins remain on the exchanges.
  • Binance boss ‘CZ’  said hard forking gives the chain no value.

Late last week, on-chain analysis firm Elliptic published their findings on the LFG’s stash of Bitcoin purchased to help collateralize the UST stablecoin.

The Foundation purchased around 80,000 BTC between January and May this year to shore up UST reserves. Since the Terra ecosystem collapsed last week, many have been asking what exactly happened to that $3.5 billion worth of Bitcoin.

The non-profit organization formed to support the growth of the Terra ecosystem announced that it would purchase as much as $10 billion in Bitcoin and other crypto assets to back UST. However, everything has changed now.

Tracking The Bitcoin Stash

Elliptic reported that more than 80,000 BTC was moved to just two major exchanges, Binance and Gemini.

On May 9, the LFG announced that it would loan $750 million worth of Bitcoin to over-the-counter (OTC) trading firms to help protect the UST peg. Around the same time, 22,189 BTC was sent from a Bitcoin address linked to LFG to a new address, and a few hours later, a further 30,000 BTC was sent from other LFG wallets to this same address.

Elliptic tracked these two wallets and reported that the entire 52,198 BTC was sent to a wallet at regulated U.S. crypto exchange Gemini within hours of these two transactions. The remaining 28,205 BTC was sent to a wallet address at Binance on May 10, it added before stating:

“It is not possible to trace the assets further or identify whether they were sold to support the UST price.”

The firm concluded that those seeking to recoup UST losses might be interested in determining whether the BTC remains held on the exchanges.

Over the weekend, the Terra team promised a post-mortem and more updates, but nothing new was on their feed at the time of writing.

Binance Boss Weighs In

On May 14, Binance boss Changpeng Zhao aired his view on the system collapse, questioning the viability of a hard fork. He said “forking does not give the new fork any value,” adding that “one cannot void all transactions after an old snapshot, both on-chain and off-chain (exchanges),” before asking:

“Where is all the BTC that was supposed to be used as reserves?”

Maybe he should have read the Elliptic report since almost half of it went to his exchange.

On May 15, he continued with his narrative, stating that “failures can/will happen. But when they do, transparency, speedy communication, and owning responsibility to the community is extremely important.”

CZ confirmed that the company had no active investments in Terra and held no UST. However, that is of little comfort to the thousands of investors that held UST or LUNA on Binance as they were delisted by the company last week before it resumed trading them on May 13.

At the time of writing, UST was still way off its peg, trading around $0.148, while LUNA was on the floor at $0.00025.