The crypto market has finally entered a “bearish” phase for a long time
While two weeks ago it was still feasible to debate the possibility of a reversal, the week of May 2–9 left no trace of doubt that the crypto market had entered a bearish phase in earnest and possibly for a long time.
At the start of the week the total capitalisation index hovered around the $1.7 trillion level. Towards the middle of the week there was even a local peak at $1.794. Then the “scary” thing happened: total capitalisation began to plummet, similar to June 2021. It took the index 4 days to break $1.4 billion, bringing its total decline for the week to over $300 billion (over 17.5%).
Obviously it would be redundant to mention once again that the trajectory of bitcoin was almost identical to the total capitalisation index, but nevertheless it is important to understand that it is almost always the former that triggers the latter and not vice versa.
So, the “cryptocurrency №1” started at 38 525 at the beginning of the week, then we could see a local peak at 39 830. Immediately afterwards, the price collapsed and at the time of writing has reached the low point at 30 572 (down 20.6% for the week). The 31 000–30 000 level is a fairly strong support, as the average purchase price of many large corporate and private bitcoin holders is around this area. If this fundamental level is breached, further rate declines could well be expected.
In the case of Ethereum, of course, we could not observe any “counter-trend”. Everything was almost identical, starting at 2840, peaking locally at 2955 and then falling continuously to 2261 (20.4% drop for the week).
Cryptocurrency exchange Binance has suspended the withdrawal of LUNA and UST tokens as the Terra-based stablecoin struggles to regain its peg to the US dollar. The news comes amid notable turbulence for Terra’s UST algorithmic stablecoin, which is the third-largest issuer of stablecoin after USDT and USDC. It has fallen sharply against the dollar over the past few days, first dropping to $0.6, then actually coming closer to its original value ($0.92), but then collapsing to $0.3. Luna, the native token of the Terra ecosystem, meanwhile has dropped more than 95% in 24 hours, its price dropped below $1 (with a historical peak of $99). Terra CEO Do Kwon has already announced a plan to restore UST peg to dollar. An algorithmic stablecoin model was found unsuccessful, the team plans to add some form of collateral.
Cryptocurrency trading platform Amber Group is seeking new funding just months after raising $200 million. According to The Block, another deal could raise the valuation of the Singapore-based startup to $8 billion. One of its sources said that the final valuation is likely to be between $5 billion and $8 billion. Bloomberg, for its part, was the first to report the fundraising and said that Amber would be worth $10 billion. Founded in 2017, Amber offers a wide range of products to both institutional and consumer customers. As of February this year, the company boasted more than 1000 institutional clients worldwide and more than $5 billion in assets under management.
El Salvador bought 500 BTC on Monday amid a severe collapse in the exchange rate. The president of the first state to make bitcoin an official tender said in a tweet that he bought 500 coins at an average price of ~$30,744. Monday’s bitcoin purchase appears to be El Salvador’s biggest purchase to date, and the tenth to date.
Katie Haun’s (ex-partner of a16z) new firm, Haun Ventures, has made its first deal with NFT start-up Zora Labs. The $50 million funding round henceforth values the company at $600 million. Zora protocol allows artists and developers to create NFT marketplaces and collections. Zora has its own primary marketplace where users can post NFTs, similar to OpenSea, but the vast majority of their NFTs are sold on third-party marketplaces. Firms like publishing startup Mirror and FWB, have used Zora’s protocol to sell NFTs to members of their communities. In addition to Haun Ventures, round sponsors include Coinbase Ventures and Kindred Ventures.
BTC transfers between exchanges and external addresses increased significantly last week to 3.2 billion. This figure is still far from the corresponding ATH values of last autumn, but it is above the level of 2018, which gives a clear indication of how much the market has grown in terms of liquidity and activity over the last few years.
Option trading activity is best expressed by the illustration above — the total dominance of put options at 30 000–34 000 indicates high expectations of further (and, judging by the expiry dates in May and June — closest) BTC price decline on the part of traders.
From last week’s trading activity chart, we can conclude that the options market has almost stopped trading long term execution dates. The main trading activity is concentrated in short-term trades — with an execution date in June (end of the first half of the year). Absence of large trading strategies for longer term on one hand emphasizes current macroeconomic uncertainty, and on the other hand leaves room for revaluation and possible market reversal.