We took a week off to distract from the busy pace of the cryptocurrency market, so we’ll try to catch up a bit. Moreover, the biggest ecosystems in the crypto market are collapsing, stablecoins are detaching from underlying assets, and Bitcoin quotes are steadily trending downward. Read more about the most significant trends and events that happened from April 30 to May 13 in CoinsPaid Media’s “weekly” digest.
Bitcoin’s (BTC) Testing of Lows
Bitcoin has been seriously shaky for the past two weeks and has been in a general downtrend. If by the end of Friday, April 29, the price of BTC was around $38,500, then by the end of Thursday, May 5, the asset was already trading around $36,500. And by Monday morning, May 9, it went down by another $2,000, and its quotes were near $34,500.
On Wednesday, May 11, Bitcoin was lower than $29,500. On Thursday morning, it fell below $26,500, fixing its minimum value since December 2020. However, by Friday morning, May 13, the first cryptocurrency partially recovered and is trading at around $30,500 as of 7:00 a.m. (GMT+3).
The main factors pressuring the Bitcoin price remain unchanged:
- the highest consumer price growth in the US in 40 years, which is overtaking the inflation rate;
- the Fed’s monetary policy, in particular the observed increase in US government bond yields and the subsequent hike in interest rates and the dollar’s strengthening;
- geopolitical tension, putting the outlook for a global food crisis into sharper focus;
- high correlation with stock indexes, which are also sensitive to the abovementioned factors.
UST and Terra (LUNA) Collapse
Bitcoin was also hit hard by the destabilization of the Terraform Labs projects: the stablecoin UST and the native token LUNA. The price of the former lost its peg to the dollar on May 8 due to a very “lucky” set of circumstances. However, many saw signs of a planned attack. Against this background, LUNA failed to stabilize the UST exchange rate, lost user confidence and collapsed by more than 99%. By now, Terra blockchain validators have stopped adding new blocks for the second time in 12 hours and are looking for options on how to stabilize the system.
Following UST, other stablecoins also began to experience problems. Specifically, the largest stablecoin USDT was detached from the dollar for a while, but Tether CTO Paolo Ardoino quickly reported that the company’s official website offers USDT exchange at the rate of 1 to 1, and there’s no reason to worry. According to him, the users exchanged about $300 million of stablecoins during a day. Given this situation, the stability of USDT was restored quickly enough.
Active Development of CBDCs
Amid the volatility of the crypto market, the Bank for International Settlements (BIS) shared the results of its study, which showed that about 90% of all central banks are actively working on CBDCs. The vast majority of them are considering primarily retail scenarios for using digital currency, that is, widespread distribution as a means of payment among ordinary citizens. And this information is supported by numerous reports on the success of CBDC research and development from central banks around the world.
Is There Any Reason to Be Optimistic?
These are just the major trends and most significant events that took place last week. You can find more news on the CoinsPaid Media website and our social networks. And even if the current situation is not optimistic in general, you can find some bright spots in it as well. For example, the crypto market crash boosted capital inflows into crypto funds to the tune of about $40 million, finally reversing the opposite trend. And cold-blooded investors are buying back the fall; for example, the government of El Salvador bought an additional 500 BTC as the value of the first cryptocurrency fell below $30,000.
Anyway, optimism is about the mindset that allows you to find opportunities, but it doesn’t negate the need to carefully analyze all of them.