Weekly Crypto Market Report: May 09-15, 2022 - BTC, ETH, USDT, LUNA & More

Market Fundamentals Analysis

After the chaos of last week, crypto has ticked up over the last 72 hours, and while vol has still been 75% on BTC, the market is substantially calmer than last week, where we briefly saw realized vols in the 200% handle. The uncertainty in the market has led to significant volatility. BTC traded lower extremely quickly: in 24 hours between Wednesday and Thursday, it traded from C$39k to a low of C$33k. ETH saw similar action, falling from C$2.8k to C$2.2k in the same time period.

Tether (USDT), the world’s largest stablecoin, regained its dollar peg after falling to as low as 95 cents last Thursday. After Terra’s (UST) collapse last week, investors’ confidence sank in USDT, thinking it would experience a similar drawback as UST. It was an unfortunate week for the Terra ecosystem following the depegging of UST. As a result, LUNA and ANC’s TVL dropped more than 96% this past week to $572M and $400M, respectively. The circulating supply of LUNA surged to more than 6.5 billion, growing 326% from the previous week, in an attempt to rescue the collapsing ecosystem. This has massively devalued the price of LUNA alongside investors selling off their positions. LUNA was down 96% since, and nearly 100% since the beginning of this week. The Terra blockchain has been halted twice and most exchanges have chosen to turn off trading due to the risks it poses for companies and investors.

The other knock-on effect is going to be in the VC space. The success of LUNA has contributed to driving the AUMs of VC desks substantially higher, and the collapse could lead to a significant contraction in the space. In a chaotic market, unexpected moves happen. One of the most shocking moves on Thursdays was the near de-pegging of Tether, USDT. There is a good deal of institutional bets that Tether will fail, and following the collapse of UST, that threatened to occur. However, the peg held on Friday and through the weekend; there has been significant volume going through in redemptions, so the arbitrage mechanism seems to be holding for the time being.

The losses from last week are pretty cleanly divided into LUNA and UST. The UST losses are potentially even more problematic for the asset class. There was almost certainly institutional money in UST, by way of Anchor, but this was also a venue for a great deal of retail money. Any failure in crypto which hits retail like this is especially damaging since it turns an entire cohort of potential crypto users away from the space permanently. Additionally, the hit taken by retail may cause regulators to put even more scrutiny on stablecoins. Already you can see policy-makers citing the UST failure as a reason for further regulation.

Here on, the recovery of the past 72-hours should be attributed to the bounce in equities over the same period, and traders are watching equities closely, to see if the bounce holds or stalls. As we have seen, equities and cryptos hold a relatively strong positive correlation, and if the broader market sustains this, we can anticipate a much-needed recovery to set in, which will give investors some respite.

Weekly Snapshot

Market Updates

-     High Court of Justice in London, the closest analog to the United States Supreme Court, has ruled that nonfungible tokens (NFT) represent “private property.

-     Canadian Bitcoin ETF adds 6.9K BTC in one day as GBTC discount hits record low.

-     The ECB drops another working paper on the digital euro, causing more outrage from Europeans opposing a central bank digital currency.

-     The Shanghai High People’s Court has issued a document in which it states that Bitcoin is subject to property rights laws and regulations.

-     Germany’s Finance Ministry has released new cryptocurrency tax guidelines with no tax payable on gains from BTC and ETH sold 12 months after acquisition.

Bitcoin Technical Analysis

Bitcoin traded in red for the 7 consecutive weeks and the bears managed to break all the major supports making a weekly low of C$33,09. The asset fell almost by 45% from its recent high of C$60,500. However, BTC, not once since January 2021 has given a weekly closing below C$35k. Each time the price went below C$35k in the past, we can see a longer-lower shadow which indicates buying at lower levels. This time too, it broke the support and bounced back up. Technically, on a daily time frame, BTC has made a ‘Long Legged Doji’ candle which indicates indecision in trend and a possible trend reversal. IF BTC holds the support and crosses above C$41,500 (Previous Bottom) then we can expect a relief rally up to C$45k-C$47k levels whereas a break or close below the support will lead to further downfall. RSI below 25 indicates an oversold or undervalued condition.

Weekly Sentiment by Coin

Another notable market week for NDAXers with several standouts, including both USDC and AXS respectively being -37% and -36%. Additionally, LTC and LUNA locked in at +64%, while the newly added RUNE reached +71% and BTC  (+71%)  did also match RUNE too.

For the latest cryptocurrency prices, check out NDAX's Markets page.

Disclaimer:

Information provided in the weekly market report is for information purposes only and should not be interpreted as investment, legal, or tax advice. Prior to investing, it is very important to evaluate your investment objectives and your risk tolerance carefully. This technical report is not meant to provide guarantees of future performance, and users should not rely on it, as the actual performance and financial results may differ significantly.