Earlier this year, analysts were incredibly bullish on the potential of stablecoins, which are cryptocurrencies backed by a reserve asset like fiat currency or gold. Now, in a new research report released May 11, analysts are asking whether the boom of the Terra (LUNA) ecosystem and its algorithmic stablecoin UST is challenging this thesis. Here are the expert opinions…
JP Morgan analyst commented on the market crash
As we reported on Kriptokoin.com, Terra’s algorithmic stablecoin UST started to diverge from the dollar in the midst of a significant rise last Saturday. . In the days that followed, the LUNA lost about 99 percent of its value. Terra’s collapse came amid significant volatility in the crypto market. But JPMorgan analysts do not yet think we are experiencing a crypto winter similar to the 2018 cycle.
Analysts note the “oversold” metrics, although they note that sentiment is “deteriorating” among crypto traders and position metrics are turning negative. In recent days, despite the failure of Terra’s UST stablecoin, the share of stablecoins in the crypto market has increased even more. “The share of stablecoins in the total cryptocurrency market cap looks extremely high, indicating oversold conditions, and from there there is a significant uptick for the crypto markets,” Panigirtzoglou said.
LUNA crash helped Ethereum
Another oversold condition that analysts have noted is a return to a more severe retracement. Retrospectivity is when the current price of an asset like Bitcoin is trading higher than its price in the futures market. The reversal occurred during the 2018 crypto winter, where the price dropped from the then-record $19,890 to below $10,000 and traded for about two more years, but analysts say the current situation isn’t all that dire.
Panigirtzoglou said there is institutional demand in crypto markets. “The severity of the pullback at this time points to more bearish/oversold conditions from May 2021,” he added. Finally, Panigirtzoglou said, “The biggest beneficiary of the collapse of the Terra ecosystem was Ethereum, which has now increased its market share from 50 percent to 57 percent, as shown in the chart above. Other layer 1 (layer-1) solutions have seen a more modest increase in their market share.” Among the Layer-1 coins, SOL, ADA, DOT, AVAX can be shown.
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