The correction or reversal in the crypto market — what happened last week?
The market continues to be under high uncertainty and pressure. Last week saw a U-shaped movement in the total cryptocurrency market capitalisation index. The week started at $1.284 trillion, then slowly dropped to $1.163 trillion by the middle of the week, and then quickly recovered to $1.261 trillion by the end of the week. Thus, we can state that the total capitalisation of the cryptocurrency market remained virtually unchanged during the week.
Bitcoin was in the same paradigm last week, but with slightly more volatility. After starting the week at 30 330, the “first cryptocurrency” found a local bottom at 28 210, before recovering to 30 700 by the end of the week. At the time of publication, the asset had already tested 32 000.
Ethereum’s price chart was also U-shaped during the past week, but the amplitude was higher than bitcoin’s. The asset started the week at 2050, then fell to 1720 in the middle, but recovered only to 1900 by the end of the period. The week’s drop was 7.3%.
Mirror Protocol, a DeFi app on the Terra blockchain, has suffered yet another attack. So far, more than $2 million has been stolen. The Mirror Protocol allows users to take long or short positions in technology stocks using synthetic assets. It runs on the old Terra blockchain — now called Terra Classic — which was replaced by a new blockchain following the collapse of the main TerraUSD (UST) stablecoin and the closely related Luna token, now called Luna Classic (LUNC). Although the old blockchain is mothballed, it continues to work.
One of the world’s largest cryptocurrency exchanges, Binance, has strengthened its European presence by obtaining registration and regulatory approval in Italy. Binance Italy has obtained regulatory approval in the country by registering as a cryptocurrency service provider with Organismo Agenti e Mediatori (OAM), as required by Italian law. The registration allows Binance to offer cryptocurrency products to its customers in Italy in accordance with local legislation, as well as to open offices and expand its local team.
Tether has launched its USDT stablecoin on the Polygon blockchain. Polygon is the 11th blockchain on which USDT will be available, following Ethereum, Solana, Avalanche, Algorand, Tron, Omni, EOS, Liquid Network, Kusama and Bitcoin Cash’s Standard Ledger Protocol. There are currently more than 19 000 decentralised applications running on Polygon. Their users can now use USDT to move money within the ecosystem and beyond.
StarkWare, the developer of the Ethereum scaling solution that uses Zero Knowledge rollup technology, has quadrupled its valuation to $8bn after raising $100m in a Series D funding round. This round was led by Greenoaks Capital and Coatue. Tiger Global, an early investor in the Israeli startup, also backed the round. StarkWare’s valuation has risen sharply over the past six months, despite the recent deterioration in sentiment following the Terra blockchain collapse. Last November, the company was valued at $2 billion. Then it raised $50 million in a round C. Several crypto projects use StarkWare’s technology, including dYdX, Sorare and Immutable X.
By the time the stock exchanges closed at the end of last week, bitcoin’s correlation to the major indices had become considerably less. On Friday evening, the difference in movement dynamics reached more than 8%. Over the weekend, the difference was partially levelled off and almost completely recovered at the start of the week.
The publication of the Federal Reserve meeting protocols has given investors short-term certainty in the rate hike process (the most likely scenario is a 0.5% hike in steps over the next two meetings). This situation made the current levels suitable for accumulation and short-term investments. Historically, further price accumulation levels have served as strong targets for support or resistance. A general decline in market volatility has also supported the spot market.
In the options market, the most traded instruments last week were quarterly options (with execution dates of June 24, September 30 and December 30) as well as short-term weekly options with an execution date of June 3.
Among the block options strategies, the interest of the traders was rather equally split between the nearest strikes of 31 000 and 34 000 for put options and 25 000–29 000 for put options with the nearest execution dates (June 3, 10 and 24). The correction in the market allowed traders to balance their short-term and long-term positions in an optimal way. This is a welcome development as macroeconomic data and general market sentiment are not yet a strong indication that the toughest period for the global economy (and crypto markets) is over.