Crypto carnage continues with Bitcoin´s price at 17-month low
By Noemi Jansana / Alejandra Zamora
Date: Thursday 12 May 2022
(Sharecast News) - It is not something that has not been seen before in the cryptocurrency market, where the most traded asset, Bitcoin, suffered huge corrections of 80%, but the drastic descents in digital assets is frightening this time, as the institutions and professional investors are leaving the market en masse. They were the last to arrive, encouraged by the dirt-cheap money guaranteed by the ultra-loose policy of the US Federal Reserve (Fed), and they are the ones jumping ship, just as they are retreating en masse from risk assets such as the stock market, especially technology stocks. However, the blow is harder on digital currencies as they, in addition to the millions of dollars lost, are seeing the fragile confidence they gained in the last year and a half evaporate.
The data speaks for itself. Bitcoin broke its support at $30,000 and has fallen to levels not seen since the end of 2020 in 17 months, below $28,000. The lows hover around $26,800, according to CoinMarketCap data, and threaten the $28,000 to $32,000 range where many expect the asset to consolidate. As if this were not enough, investments in Bitcoins by MicroStrategy, Tesla, the Government of El Salvador and many others are losing money right now. It is currently trading 60% below its all-time high of November 2021.
Total market cap is at $1.81 trillion, down about $600 billion from a week ago when it was around $1.8 trillion and $1 trillion lower than in early April when it hit $2.1 trillion. The picture is bleak for most tokens: Ethereum falls to almost $1,800 and market losses are 30% for almost all 'cryptos' in the last 24 hours.
Obviously, the technical aspect of the digital currency par excellence is scary. Bitcoin fell below the key support zone of $30,000 and settled below the 100-hour simple moving average. The decline accelerated below the $29,500 level. Finally, the price plummeted below the $28,000 level, reaching a new 1.5-year low near $27,000.
Now, the significant resistance level could be around $31,500. The key breakout zone remains around $32,000, above which the price can start a steady recovery wave in the short term. If it fails to break above the $30,000 resistance level, it could fall. The next significant support is seen near $27,700. A break and close below the $27,700 support level could accelerate losses. The next significant support level could be $27,200, below that, bears could target the $26,500 support area. "Traders are looking at the next support level, which is at $25,000 and, immediately after that, $22,000," noted Naeem Aslam, head of analysis at Avatrade.
As for fundamentals, the open crisis at Terra with its two tokens, the LUNA and the Terra dollar (UST), are raising not only headwinds, but a hurricane over the market, as tough regulation on so-called stable coins in the US is feared. "As well as macroeconomics, with a Federal Reserve relentless with interest rate hikes, keeping assets like stocks and digital currencies on the ropes, there is now a fundamental risk to the cryptocurrency industry, as the UST stablecoin has dropped below $1," they commented from Global Block.
Unlike many stablecoins, such as Tether, USDC or BUSD, Terra's UST is an algorithmic stablecoin, meaning that instead of being backed 1-1 by various assets, it relies on an algorithm that uses various market incentives to maintain a set price. "Investors are concerned that the company has dumped most of its Bitcoins that it held as UST reserves, that at one point was helping the price of the currency," Aslam explained.
The flurry of selling has triggered an extreme panic that has no end in sight. Even the news that Terra will sacrifice LUNA to save UST has not dampened the damage. The implications are severe for the decentralized finance (DeFi) market as numerous projects had exposure or were anchored to UST and the stampede in the crypto market has dragged shares of Coinbase, down more than 26%, and MicroStrategy, down more than 25%.
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