TerraUSD loses peg, Do Kwon sells off BTC holdings, did that crash the market?; plus our weekly BTC and ETH analysis
- Did Terra Stablecoin Crash $BTC and Market Sentiment?
- Bitcoin/USD – Bottom In?
- Ethereum/USD – 2k Next?
Did Terra Stablecoin Crash $BTC and Market Sentiment?
On Monday May 9th, TerraUSD ($UST) lost its dollar peg and fell to a low of 60 cents. As UST depegged from the dollar, the price of LUNA also dropped by more than 50% and is currently valued at approximately $30 at the time of writing. UST was designed to work with LUNA to maintain a price of $1 using an incentive for traders to swap units of UST for LUNA when price falls below a dollar, which removes the former from circulation. When UST price rises above a dollar, the system works in reverse & LUNA tokens are removed from circulation to create equivalent new units of UST. Over the weekend these mechanisms stopped working and UST lost its dollar peg. As the Stablecoin’s price peg began to slip, The Luna Foundation Guard (LFG) co-founded by Do Kwon voted to lend out $750M in Bitcoin and $750M in UST to defend the $UST dollar peg, especially under the volatility and uncertainty of macro conditions in the traditional markets, but even that was not enough. With Bitcoin already unwinding due to investors being more risk off, LFG, one of the biggest individual holders of BTC contributed to over $250M in liquidations.
Bitcoin/USD – Bottom In?
BTC Daily Chart
BTC Weekly Chart
At the time of writing, Bitcoin is priced at about $31k and has lost its $34k range low. I mentioned in the last article that if the midpoint was not reclaimed and was lost that I would expect a push lower to either the $34k support or the larger HTF support area at $30k and price did just that. Buyers have seemed to step in to defend the $30k level for now. I think that price will stick around this level and consolidate for a while before it makes the next move. Normally when Bitcoin makes large moves like this last one, we usually see some form of consolidation in price.
Bitcoin Bull Scenario
Bitcoin maintains above $30k and pushes back to the $34k level.
Bitcoin Bear Scenario
Bitcoin does not maintain $30k and I expect a capitulation event. $30k is a major must hold level since there is very minimal support under this level.
Ethereum/USD – 2k Next?
ETH Daily Chart
ETH Weekly Chart
At the time of writing, Ethereum is priced at $2.3k after falling to a low of $2198 on yesterday’s price decrease. In last week’s article I mentioned $2.3k being the next support if the $2.7k level was rejected and since then that level has provided support for Ethereum. Although ETH closed below its range low and has since then found its ways back above the level, I am still expecting it to follow in BTC’s footsteps and reach closer to the bottom of the HTF (high timeframe) range especially if Bitcoin does not reclaim its $34k support very soon.
Ethereum Bull Scenario
ETH maintains above $2.3k and pushes back to the $2.7k level.
Ethereum Bear Scenario
ETH does not maintain $2.3k and I would expect for the $1.7k – $2k level to hold up as support.