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Stablecoin Crash and Dismal CPI Numbers Send Crypto Markets Tumbling

The Crypto Week in Summary

A historic week in crypto saw free markets tested and algorithmic stablecoin UST all but destroyed. As inflation numbers continued to disappoint and regulators renewed promises to pull digital assets under Federal control, the crypto community vowed to continue BUIDLing amidst the chaos and FUD.

At a glance...

  • TerraUSD (UST) stablecoin exploited, validators halt Terra blockchain
  • UST partner coin LUNA delisted from Binance due to “significant risks”
  • US CPI numbers suggest possible inflation bottom
  • $COMP treasury was first DeFi offering to get S&P rating

Top Market Trends:

  • Terra USD (UST) unpegged from $1.00 after a whale selloff on Curve and Binance, creating a falling knife pattern. $LUNA validators halted the Terra Blockchain to disable staking and add 55 billion new LUNA tokens, but Binance delisted it.
  • Dubai announced it is creating a government-sponsored Metaverse headquarters named MetaHQ on Sandbox’s gaming Metaverse.
  • Brazil’s biggest digital bank, Nubank, allocated 1% of its treasury to Bitcoin and enabled the buying and selling of BTC and ETH.
  • Coinbase’s NFT market saw less than 150 transactions and under $75 million in volume on its public debut on Wednesday.

Movers and Shakers

Top 7-day Gainers:
Maker (MKR) +10.85%
BinanceUSD (BUSD) +.88%
USDC (USDC) +.78%
Curve.fi DAI/USDC/USDT (3CRV) +.13%
TrueUSD (TUSD) +.10%

Top 7-day Losers:
Terra (LUNA) -99.98%
TerraUSD (UST) -89.72%
FraxShare (FXS) -49.38%
Senso (SENSO) -44.48%
THORchain (RUNE) -42.44%

Technical Summary

Bitcoin Pulse
Following mass FUD surrounding UST and continued global economic fragility, Bitcoin (BTC) experienced a record 6th consecutive red weekly candle. Since the overall market crash that began Monday, BTC has dropped to over 50% of its ATH dipping as low as $26,600 on May 12th.

  • On the 2-hour chart, RSI showed a bullish reversal divergence before BTC broke from a descending channel. According to the 0.382 Fib retracement, in case of validation, BTC could target $31.8k as next resistance.

  • BTC has been consolidating around the $28k mark on the 24/hour chart, with an ascending pattern emerging the last few hours with definitive new higher highs and higher lows.

Quadency_Terminal_BTC_Long_TermBitcoin 2-hour chart - Potential breakout above $29,000

Zooming out, BTC is trading at late 2020 price levels and testing out a $29,000 support level.

  • On the daily chart we can see the importance of this resistance level.
  • The Relative Strength Index (RSI) dipped below 2018 levels to 22 and continued dropping through into Friday morning.
Quadency_Terminal_BTC_Short_TermBitcoin daily chart - $29,000 is a long-term support level

Altcoins on the Move
NFT and metaverse tokens and even some crypto majors plummeted during the bloodbath that ensued following the UST depegging and continued news of economic instability. Extreme fear has gripped global markets and taken alts with it while stablecoins other than UST remained steady, their modest moves one of the few green areas of the market.

Quadency_Terminal_LUNA_CrashTerraLuna (LUNA) down 99.8% after UST exploit

  • THORchain (Rune), Avalanche (AVAX) and several other mainstays were down over 30%.
  • Major metaverse tokens including Sandbox (SAND) and Axie Infinity (AXS) posted double digit losses mid week, but AXS reversed to end the week in the green +5.18%.
  • UST stablecoin crashed multiple times to as low as $.29 and currently rests at $.33, despite a mass influx of funds and billions of newly minted LUNA tokens. Over $2 billion in UST was withdrawn from Anchor protocol, sending Terra’s $LUNA into a tailspin, down 99.7% over 2 days.
  • Despite this week’s chaos, many altcoins partly recovered today. In the Top 100 by market cap, nearly all coins and altcoins are showing double digit gains.

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  • Algorand announced it will become an official blockchain partner for FIFA ahead of this year’s World Cup in Qatar.
  • California Governor Gavin Newsom signed an executive order for creating a transparent regulatory model for in-state Web3-based companies.
  • Beeple and Madonna announced drops on SuperRare for their “Mother of All Creations” NFTs to raise funds for 3 motherhood-based non-profits.
  • Copper announced it would be offering NFT custody for institutional investors wanting to deposit, store and withdraw their NFT assets.

Spotlight on: Maker (MKR)

Maker (MKR) is an Ethereum-based crypto that was developed to support the DAI stablecoin through a smart contract, external market mechanisms, and monetary incentives. With all eyes this week on UST and its partner LUNA token, MKR was down only 2.57% while DAI has not strayed from its peg for a year.

MKR-7-day-price-actionMKR/USDT 7-day chart

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We Looked Into: How Stablecoins are Pegged

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Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.