Bitcoin (BTC) starts a new week below $30,000 as it continues its battle to save the market from new lows. What awaits us this week, while the effects of BTC price movements and the collapse of Terra (LUNA), which caused the decline of cryptocurrencies such as SHIB, ETH, SOL, continue?
SHIB, BTC, ETH bulls face negative
Wariness among traders has become palpable this week after smashing market expectations in the past seven days. When blockchain protocol Terra’s LUNA and TerraUSD (UST) tokens exploded, their declines bounced off the crypto markets, and Bitcoin was naturally no exception. After falling close to $25,000, BTC/USD displayed a V-shaped recovery to cross $31,000 in the next few days. While its current landscape certainly looks more reassuring than that of some altcoins, traders are shying away from any definitive bullish interpretation.
An important narrative gaining momentum revolves around current levels that form the basis for a “leap of relief.” “I think the bears are about to reject any further bullishness as we bulls have been battling the trend for the past few weeks,” popular Twitter account IncomeSharks wrote in part of the last two posts regarding the BTC/USD outlook. But he added that those currently on a downward trend would be “too stuck in their biases.” Meanwhile, fellow trader Crypto Tony said the pair should reclaim $31,000, not just $30,000, as it points to previous week’s highs.
DXY holds up as Davos approaches
Last week saw the Fed grappling with inflation, rate hikes and geopolitical strife, all of which was ironically overshadowed almost instantly by Terra. By contrast, such a major announcement is not expected this week, but underlying tensions have not disappeared. As such, the Russia-Ukraine war, inflation and the measures taken to reduce it are on the agenda of central banks around the world. This situation is thought to be the main topic of the World Economic Forum, which started on 22 May.
The Forum and the potential of attendees to talk about Bitcoin, both positive and negative, will follow a different meeting this week in El Salvador where representatives of 44 countries will discuss Bitcoin, as we have also reported on Kriptokoin.com. At the same time, the US dollar index (DXY) climbed to 105, reaching its highest level since the week of December 9, 2002. “At the same time, the Euro is testing a 5-year low against the US Dollar,” analyst Blockchain Backer said as part of a crypto-related macro-environment thread.
DXY chart Blockchain Backer argues that DXY has traditionally put pressure on equities and crypto markets as well, with the latter still showing the correctional structures seen in bear markets. “So we’re going through a lot here. Dow Jones is below last week’s support. DXY is at the peak of 20 years. EURUSD is in support. The altcoin market and Ethereum have similar correction structures seen before. However, no token is flying as if there is a reversal,” he said.
Tether recovers after “depegging”
Regardless of upcoming events, what haunted the market on Monday was the specter of last week’s turmoil. Developments such as the Luna Foundation Guard’s (LFG) mass sale of BTC reserves were confirmed by their latest tweet. However, the attention is not just on UST, but on the industry’s largest stablecoin by market cap. Tether (USDT) has seen depegging from the dollar peg last week.
USDT chart The creators of Tether argued that USDT will survive the storm as it is inherently different from UST and algorithmic stablecoins in general. “Over the next few weeks, we will begin to learn the full extent of the damage as reports of significant losses and collapses emerge,” crypto trading firm QCP Capital told Telegram channel subscribers in its latest May 13 update.
CryptoQuant: Institutions trying to buy Bitcoin
Anyone buying Bitcoin? The data says there’s a definite “yes” answer to this from certain market segments. Ki Young Ju, CEO of analytics platform CryptoQuant, said in the analysis published on May 16, that institutional investors are interested in Bitcoin between $25,000 and $30,000. Ki explained that while the LUNA debacle forced bids to drop to $25,000, overall bids remained the same for a year:
If you see the BTC-USD order book heatmap for Coinbase, it’s been pretty intense since the last bear market in May 2021. They have thick command walls. I think institutions tried to accumulate BTC at $30,000 but had to rebuild their bid wall at $25,000 due to unexpected LFG sales.
Bitcoin address growth contrasts with distress in sentiment in the SHIB, ETH, BTC space
It’s no surprise that crypto market sentiment remains on the ground. Reflecting nerves over price stability, the Crypto Fear and Greed Index is at 14/100 this week and is firmly in the “extreme fear” territory. The recovery, which hit the historic low last week, was noticeably less strong than the original drop, which brought the index down from 27/100 to 10/100 in five days.
On the other hand, last week’s data from Santiment shows that unique Bitcoin addresses continue to grow amid the chaos. In his Twitter comments, “The good thing about this 33 percent drop in the last 3 weeks is that BTC’s address activity has remained stable. The difference between addresses and price is at the highest level in 16 months,” he said.
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