Bitcoin Update
The crypto market has been falling for seven weeks in a row. During this time, Bitcoin has fallen in price against the US dollar by 39%, to $26,700. The last week has also been very volatile. The fall resumed on Monday. Active sales of cryptocurrency were observed on May 9 and 11. First, the bitcoin rate dropped to $29,730. After a 36-hour correction (flat), the fall intensified to $26,700.
The reasons for the weakening of cryptocurrencies have not changed: risk aversion against the background of the dollar rally; rising yields on US government bonds; the fall of US stock indices and the tightening of quarantine due to COVID-19 in Beijing. Also at the beginning of the week, according to the CryptoQuant platform, investors brought crypto to exchanges for subsequent sale.
Increased volatility in the market was observed after the release of the US inflation report for April. The annual rate of price growth in April slowed down less than expected. The greatest blow fell on the shares of technology corporations from the sectors of IT and communications.
After the inflationary report, the fears again returned to investors that the Fed will still move on to aggressively raising rates to curb inflation. And tightening monetary policy will push the economy into recession.
The situation with UST and LUNA added fuel to the fire. UST got rid of the dollar, and against this background, the LUNA token reset to zero and fell into a coma. Binance has suspended all trading and removed all pairs from LUNA, leaving only LUNA/BUSD. Token survived clinical death, but still did not come out in a coma (on a ventilator).
Binance has announced that LUNA trading has resumed. UST returned to the $0.20 level. On Saturday, the price recovered 1450% to 0.00045. But in April, the price was trading at $115. There were no manipulations here.
The situation with UST and Luna attracted the attention of regulators. US Treasury Secretary Janet Yellen has called for legislation to regulate stablecoins before the end of 2022. The Fed believes that the crisis in the crypto segment can harm the economy and threaten financial stability. Market participants also have many questions for Tether. Investors and regulators doubt the quality of the collateral for such assets, which puts investors' capital at risk. The index of fear and greed dropped to 10 points (“extreme fear”).
The Terra theme will continue to put pressure on crypto investors in the coming weeks despite Bitcoin’s Friday bounce. On Friday, the price recovered to $31,083. The cryptocurrency has risen in price against the backdrop of a general correction of the dollar on Forex and the growth of the S&P500 and Nasdaq indices.
Fed Chairman Jerome Powell reiterated that the central bank will raise interest rates by 0.5% at the next two meetings. His statements again eased fears of a 75 basis point rate hike that some investors had expected.
On Saturday, May 14, the BTC/USDt pair bought back 1.35% to $28,890. The sellers took down the key support of $28,000-$30,000. Despite the fact that the price is trading in this zone, there are still high risks of a further move towards the $20,000 level. The time zone for a reversal, according to my calculations, is between May 30 - June 6.
On Tuesday (May 17) speeches by the head of the US Federal Reserve, J. Powell, and the head of the ECB, C. Lagarde, are scheduled. If Powell once again confirms that the Central Bank will not raise the rate by 75 bp, then it is likely that we will see a correction in stock indices and bitcoin. For buyers, the nearest targets will be the levels of $35,250 and $38,200.