Bitcoin momentarily misplaced its 2021 bull market assist by dropping to $26,000 on Could 12. Since then, it has climbed again to $30,000 and has been consolidating round that worth degree.
Nevertheless, Bitcoin is way from being out of the woods since there isn’t a substantial assist till the earlier all-time excessive worth at $20,000 if the present $28,000-$30,000 vary is misplaced. A serious level of concern is that though the US greenback index is present process a correction proper now, there has virtually been no response within the worth of Bitcoin, which hints on the weak point in Bitcoin’s pattern.
Outflows from altcoins are additionally persevering with following the UST/Terra debacle. Ethereum began to underperform Bitcoin for the primary time because the 2018/19 bear market hinting at a brand new uptrend within the dominance of Bitcoin. Regardless of Tether’s just lately printed audit report which confirms its claimed $82 billion reserves, confidence in altcoin and stablecoin markets stays low.
On this difficulty of the crypto ecosystem replace, we are going to talk about the trade inflows of Bitcoin, in addition to the Bitcoin worry & greed index and a quick technical evaluation. We may also present an replace on Ethereum and the UST/Terra ecosystem, together with Tether’s current audit.
Bitcoin deposits to exchanges
Following the UST stablecoin’s de-pegging on Could 8, the Luna Basis Guard (LFG), a non-profit group that backs the Terra blockchain ecosystem, bought all of its Bitcoin reserves (80,394 BTC) to defend UST’s peg. This meant depositing bitcoins to cryptocurrency exchanges. As you’ll be able to observe within the chart beneath, trade balances surged by as a lot as 86,000 bitcoins from their early Could backside ranges.
Supply: Glassnode
Will increase in trade inflows can counsel that buyers are keen on promoting their Bitcoin holdings by depositing them to exchanges. This usually occurs shortly earlier than and after cycle tops, in addition to earlier than capitulation occasions.
Though the Bitcoin steadiness on crypto exchanges has been declining since January 2022, the sudden turnaround in Could triggered by the LFG sell-off might catalyze a brand new uptrend except market sentiment turns optimistic quickly. Since Could 2022 doesn’t correspond to a Bitcoin cycle high, this potential new uptrend within the BTC trade steadiness might open the gates for a brand new Bitcoin downtrend.
Bitcoin Worry and Greed Index
Bitcoin’s worry and greed index measures market sentiment. Excessive greed normally precedes cycle tops whereas excessive worry precedes market bottoms.
Supply: Various.me
The Worry and Greed Index is presently at ten which corresponds to a traditionally low degree and means excessive worry. As you’ll be able to see within the chart beneath, this index virtually at all times bottomed out at ten over the last 4 years. This implies that there’s a market construction at this degree and that the Bitcoin backside or capitulation might be very close to if it has not bottomed out already.
Supply: Various.me
Bitcoin worth evaluation
Throughout the peak of the UST/Luna disaster, Bitcoin fell to as little as $26,000. Whether or not Bitcoin has one other leg down largely is dependent upon the already deteriorated market sentiment, in addition to the following motion of the S&P 500 inventory index.
- S&P 500 inventory index
If the S&P 500 inventory index within the U.S. closes a buying and selling day beneath the crucial 3,850 assist, it might set off a sell-off to the following main assist at 3,230 as you’ll be able to observe within the charts beneath.
This might imply an extra 17% drop from the present worth, which might, traditionally talking, create as giant as an roughly 30% drop in Bitcoin’s worth.
S&P 500 each day worth chart. Supply: Tradingview
The index fell to as little as 3,810 on Friday, Could 20 however managed to shut the day above 3,900. The S&P’s strikes shall be very crucial this week which might additionally influence the cryptocurrency market.
- Bitcoin’s short-term construction
Within the meantime, Bitcoin wants to guard its short-term market construction at $28,700.
A four-hour closing beneath this degree, if accompanied by new unfavorable developments amongst cryptocurrencies and sell-offs within the S&P, might set off panic out there and trigger capitulation for Bitcoin.
Bitcoin/U.S. Greenback worth chart on a 4-hour timeframe
- Overbought each day stochastic RSI
Throughout bear markets, momentum indicators can get rapidly overbought on increased time frames, just like the each day timeframe. Regardless of falling from $42,000 on April 21 to $26,000 by Could 12, Bitcoin’s stochastic RSI has already change into overbought on the each day chart with a mere 15% bounce from the $26,000 backside (see the chart beneath).
That is typical bear market habits in cryptocurrencies which might counsel that Bitcoin’s current bounce could also be nearing a high quickly and that the worth might not be capable to break above its present horizontal vary (the $32,000 resistance) because it runs out of additional momentum.
Bitcoin/U.S. Greenback each day worth chart with the stochastic RSI indicator
- The US Greenback index
The US Greenback index, DXY, was rejected on the 105 resistance degree on Could 13 and the worth has been dropping since then. Though the index fell to 102 very quickly on the week of Could 16, Bitcoin confirmed virtually no response within the meantime. Usually, such a steep drop within the DXY would set off a 20-25% rally within the Bitcoin worth. As a substitute, Bitcoin might solely vary horizontally between $29,000 and $31,000 with its each day stochastic RSI already changing into overbought.
This implies that the Bitcoin pattern is weak and that it could have problem breaking out of its present horizontal vary to the upside.
Ethereum worth evaluation
Ethereum carried out significantly better than Bitcoin throughout 2021, producing as a lot as 4 instances extra returns as of December 2021.
Up to now in 2022, Ethereum has failed to achieve the 0.1 historic resistance when it comes to the Ethereum/Bitcoin worth parity. It additionally couldn’t get away of the rising channel that it has been following for over a yr (see the chart beneath).
Rising channels are sometimes confused with bull flags as a result of in addition they have a pole. Nevertheless, in bull flags, the flag is tilted downwards whereas rising channels face upwards, which usually tend to break downwards throughout a macro downtrend.
Throughout Bitcoin’s March 2022 rally, Ethereum failed to extend greater than Bitcoin and made a decrease excessive worth on the Ethereum/Bitcoin chart (circled in orange within the chart beneath).
Ethereum/Bitcoin parity chart on a weekly timeframe
The Ethereum/Bitcoin parity is on the very backside of the channel assist now. Dropping the channel assist attributable to a Bitcoin crash or one other black swan occasion might trigger the parity to begin a brand new, stronger downtrend that would go as little as the following main assist at 0.04.
Ethereum/Bitcoin parity chart on a each day timeframe
Ethereum recorded a extremely bearish rejection candle on Could 11 simply when it was trying a breakout to the upside (see the chart above). The UST/Luna debacle introduced a sudden and robust sell-off on the Ethereum/Bitcoin parity. Such sturdy rejections throughout the identical buying and selling day usually provoke a brand new, stronger pattern to the draw back.
Given the present outlook of the altcoin market as a consequence of the UST/Terra turmoil, tides could also be turning for Ethereum except the continuing merge of the Ethereum blockchain creates a optimistic catalyst and new pleasure out there.
The proposed Terra fork
Luna printing stopped on Friday, Could 13 after 6.5 trillion tokens had been put into circulation and the token worth bottomed out at round $0.00001. Since then, debates to save lots of the Terra ecosystem have been flooding the crypto house.
Voluntary coin burns by particular person buyers, compensating small buyers from the Luna Basis Guard, and issuing a brand new stablecoin backed with actual property are a few of the options which were made.
The latest dialogue to revive the mission is to create a fork of the Terra blockchain.
Terra’s CEO and co-founder Do Kwon has just lately proposed forking the Terra community into a brand new chain.
In line with the proposal, the fork would create one billion new tokens to distribute amongst buyers to incentivize them to remain within the Terra ecosystem whereas the outdated chain would change into often known as “Terra Basic” and the unique Luna tokens would change into “Luna Basic”.
Terraform Labs is presently having a ballot to measure the investor sentiment in the direction of a fork of the prevailing blockchain. In line with the ballot’s outcomes to date, 65% of the voters voted in favor of the fork.
Alternatively, a current vote on Twitter reveals a contradictory final result to the Terra discussion board ballot. The vote asks the Luna neighborhood whether or not they need to fork Terra or burn Luna tokens and 93% of the respondents thus far have voted in favor of a Luna token burn.
Whether or not the Terra administration will heed the Terra neighborhood or the Twitter neighborhood, or provide you with one other answer stays to be seen within the coming days.
Tether’s current audit report
Throughout the chaos of the UST’s de-pegging information, the market additionally grew to become terrified of Tether’s peg which precipitated the biggest stablecoin to quickly lose its peg. The dimensions of the Tether (USDT) market cap was 4 instances bigger than that of UST, so a meltdown within the worth of USDT poses a way more critical danger to the cryptocurrency market’s existence.
In contrast to UST although, the de-pegging of Tether was a short-lived one. Though the worth of USDT briefly dropped to a low of $0.96, it recovered inside 36 hours.
To guard the $1 peg, the Tether workforce introduced on Could 12 that verified clients can redeem their US Greenback deposits from the Tether treasury in return for USDT tokens they maintain. Up to now, $8 billion value of USDT has been redeemed and faraway from circulation which dropped the full USDT provide from $82 billion to $74 billion.
With the cooling down of the UST disaster, USDT redemptions additionally got here to a halt securing the Tether ecosystem for now. To regain the arrogance of its buyers and the general cryptocurrency market, the Tether administration additionally launched an audit report that verifies its consolidated reserves.
The audit report might come as a aid to USDT holders as there was numerous uncertainty about how Tether backs itself. This was exacerbated by the SEC’s subpoenas previously and the excessive ratio of much less liquid industrial papers in Tether’s reserves as of the top of 2021.
In line with the audit carried out by the impartial accounting agency, MHA Cayman, the full property of Tether Holdings are at the least $82,424,821,101, which is considerably increased than the worth of issued USDT digital tokens in circulation ($74 billion). This implies Tether’s reserves towards issued digital tokens exceed the quantity required to redeem them.
