The crypto market has continued to bleed due to various factors. The unsteady algorithm of “stablecoin” has been pulling the crypto market sentiment towards the negative side. The US-dollar pegged tokens are getting depegged like what happened with LUNA’s UST and continue to drag the market down. Today, the market is finally in the green after witnessing all the major coins trading low this week, with the market capitalization of $1.3 Tn up by about 9% in the last 24 hours. The market is green primarily because the markets fell but quickly rebound today.
The explosion of the Terra ecosystem has been infecting negatively other major coins including Bitcoin and Ethereum. The crisis with Terra’s stablecoin TerraUSD (UST) and the free fall of Terra’s LUNA token have further impacted crypto sentiment. Although Terraform Labs CEO Do Kwon announced a relief plan, the community doesn’t seem to have much hope for a revival. This is because the project has failed and it has primarily become zero. Another obstacle to a quick improvement in sentiment is that the US CPI is up 8.3% year-on-year and beating estimates by 0.2%. Though the read is slightly below March’s 8.5% reading, the slow deceleration suggests there is no break from further Fed tightening.
Bitcoin has lost more than 28 percent of its value in the last 7 days. This is because the dollar is gaining in strength due to Fed’s interest rate hike, apart from changes in other macro-economic fundamentals. At press time, the BTC price was as low as $28,542. Meanwhile, the price of TerraUSD (UST), which is believed to be the price driver of the current cryptocurrency market crash, is down 32% in the last 7 days. In the past 24 hours, the price of UST fell more than 18 percent to $0.6782. BTC/USD is trading above $29,500 and holding higher after Wall Street opened. The pair was volatile but showed few signs of fresh capitulation, with a sea of long positions on major exchanges Bitfinex showing what analysts believed was the belief the lows weren’t coming back.
It is being highlighted that US dollar strength is a factor to consider in Bitcoin’s next move. The US Dollar Index (DXY), which is inversely correlated with Bitcoin, was in no mood for a correction as it recovered after a brief drop on March 11.
The ongoing crypto bear market will not end until the Federal Reserve eases its aggressive monetary policy by halting rate hikes. The combination of high-interest rates and fears of an impending recession as the main macro factors causing the current crypto bear market. At this point, the Fed will ease monetary policy and inject some liquidity into financial markets, sparking the next cryptocurrency rally. Aside from the macroeconomic picture, other factors that could favour the next bull run include the approval of a bitcoin spot ETF and Ethereum’s expected move to a proof-of-stake system in the third quarter of 2022.
Although the screen during the capitulation is scary, it also offers one of the best times to compete against the crowd and accumulate fundamentally strong cryptocurrencies at a bargain price.
Technical Outlook:
BITCOIN:
BITCOIN traded in red for the 7 consecutive weeks and the bears managed to break all the major supports making a weekly low of $25,388. The asset fell almost 47% from its recent high of $48,240. However, BTC, not once since January 2021 has given a weekly closing below $30k. Every time the price went below $30k in the past, we can see a long lower shadow which indicates buying at lower levels. This time too, it broke the support, tested the 200-week Moving Average and bounced back up. Hence, this week’s closing is very important, if the asset closes above $30k then we can expect a relief rally whereas a close below $28,800 can lead to further downfall. In the daily time frame, BTC has made a ‘Long Legged Doji’ candle indicating uncertainty in the trend and that a trend reversal may occur.
ETH:
ETH witnessed a sharp fall after facing stiff resistance at 200 Day Moving Average, Horizontal trendline and 20 Day Moving Average. The asset broke the psychological level of $2k and made a weekly low of $1,763. ETH has taken support at the key level of $1,774 (127.2% Fibonacci retracement level) and the horizontal trendline at $1,711 and has bounced back above $2,000.If the asset hold and sustain above the support then we can expect some relief rally and can surge up to $2,400 levels.
Matic:
Matic was trading in a broad range from $1.7 to $1.3. The asset gave a breakout on the downside and witnessed a massive fall. The prices plunged almost by 60% within 3 weeks making the low of $0.501. Matic is trying to make a ‘Bullish Engulfing’ pattern. If today it gives closing above $0.601 and the subsequent candle crosses today’s high then we can expect some relief rally up to $0.85.
Weekly Snapshot:
| USD ($) | 05 May 22 | 12 May 22 | Previous Week | Current Week | |||
| Close | Close | % Change | High | Low | High | Low | |
| BTC | $36,575 | $29,048 | -20.58% | $39,902 | $36,269 | $26,350 | $36,130 |
| ETH | $2,749 | $1,962 | -28.64% | $2,957 | $2,705 | $2,697 | $1,748 |
| MATIC | $1.06 | $0.60 | -43.25% | $1.19 | $1.02 | $1.06 | $0.51 |
| Cryptocurrency | 1w – % Vol. Change (Global) |
| BitCoin (BTC) | 62.01% |
| Ethereum (ETH) | 81.48% |
| Polygon (MATIC) | 55.50% |
| Resistance 2 | $40,000 | $2,650 | $1.00 | $0.65 |
|---|---|---|---|---|
| Resistance 1 | $36,500 | $2,400 | $0.85 | $0.45 |
| USD | BTC | ETH | MATIC | BAT |
| Support 1 | $28,800 | $1,750 | $0.60 | $0.35 |
| Support 2 | $25,000 | $1,550 | $0.35 | $0.28 |
Market Updates:
- Validators for the Terra blockchain have decided to officially halt network activity on Thursday in a move designed to prevent governance attacks following the severe devaluation of the network’s LUNA token.
- 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.
- In addition to buying Bitcoin, Nubank will offer BTC and ETH investment services to its more than 50 million customers.
- Tether announced that $1 billion USDT will be transferred to Ethereum while another $20 million USDT will go to Avalanche. The company also noted that it’s “business as usual” amid the current market panic.
*Sources of charts: https://cryptowat.ch, https://pro.zebpay.com/trade/USDT-INR
Disclaimer: This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation, or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness, or reliability of the information, opinions, or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptocurrencies viz. Bitcoin, Bitcoin Cash, Ethereum, etc are very speculative and are subject to market risks. The analysis by the Author is for informational purposes only and should not be treated as investment advice.
