News updates May 09, 2022
1. Luna Foundation Guard says it will lend out $1.5 billion in BTC and UST to defend stablecoin peg
The Luna Foundation Guard (LFG) said Monday that it will lend out hundreds of millions of dollars worth of bitcoin and the stablecoin UST in order to defend the latter's peg amid a period of market volatility.
As reported Sunday by The Block, UST -- the algorithmic stablecoin tied to the Terra crypto ecosystem -- slipped below its intended $1 parity, though it has since recovered ground since Saturday's low. At press time, UST is trading at $0.9955 against USDT on Binance.
In a tweet thread, LFG said that it would "will proactively defend the stability of the $UST peg & broader Terra economy, especially under volatility and the uncertainty of macro conditions in legacy markets."
LFG's governing council includes Terraform Labs co-founder Do Kwon, Terraform Labs head of research Nicholas Platias and Jump Crypto president Kanav Kariya, among others.
The Singapore-based non-profit group was formed in January to support the Terra ecosystem as well as "the sustainability and stability of Terra’s algorithmic stablecoins," according to an announcement post at the time.
In February, The Block reported that LFG had raised $1 billion to build a bitcoin-based reserve intended to serve as a support mechanism for UST's peg. As of earlier this week, LFG held more than $3 billion worth of bitcoin in its reserve.
In a subsequent tweet thread posted after the publication of this report, Kwon wrote that "[w]hile buys and sells of UST are not meaningfully directional now, we felt it was valuable to have capital ready to be deployed in the current market."
"As markets recover, we plan to have the loan redeemed to us in BTC, increasing the size of our total reserves," he continued.
2. Bitcoin Price Hits Three-Month Low, What’s Driving This?
At this point, it is no longer news that bitcoin has now hit its lowest point in three months. The last time the digital asset had seen its price break below $34,000 had been in late January but had continued to hold up well after this. Last time, the low market momentum following the market crash on December 4th had been the culprit. This time around, a whole different beast is behind the wheel of the tumbling asset value.
Stock Market On The Rocks
Bitcoin’s correlation with the stock market had been on the rise in the past couple of months, eventually hitting a high point in the first quarter of 2022. This correlation had continued to define the market movements of cryptocurrencies over the last few months. In multiple moves, the crypto market has been mirroring the stock market and this same mirroring has triggered the recent downtrend.
Most notable has been the decline in the NASDAQ. Dominated by tech stocks, the Nasdaq has taken a beating in the market. In the last week alone, it has lost 1.5% and on a year-to-date basis is not faring as well having lost about 22% in this time period.
3. The Bahamas’ ‘Sand Dollar’ Needs Improved Cybersecurity, IMF Says
The CBDC represents just a tiny fraction of the available currency in the Caribbean nation, the international organization noted. The Bahamas’ central bank digital currency (CBDC), known as the sand dollar, needs better reach and more security to achieve its aims, the International Monetary Fund (IMF) said in a review published Monday.
In a survey of the Caribbean nation's economic and financial policy, the IMF noted the sand dollar represents only 0.1% of currency in circulation.
The country’s central bank “should continue strengthening internal capacity – including on cybersecurity and the resilience of systems associated with the sand dollar,” said the IMF, adding that there are currently “limited avenues to use the sand dollar.”
4. Venezuela Bets on De-Dollarization After Foreign Currency and Crypto Tax Is Applied.
The government of Venezuela is now focusing its action on trying to establish the bolivar as the go-to currency for purchases in the country. According to several economists, this might be a risky bet in a country that has just exited hyperinflation and still suffers high levels of inflation. However, the establishment of a 3% tax targeting expenses in foreign currency and crypto is having some effects in this regard.
Venezuela Seeks to Strengthen Its Fiat Currency
After having defacto dollarization, which the president of the country called an “escape valve” from the economic crisis that Venezuela had faced five years ago, now the country is seeking to establish its fiat currency, the bolivar, as an interesting choice for payments. A new tax called the IGTF, which seeks to tax transactions and payments made in dollars, foreign currency, and crypto at 3% in some instances, seems directed to aid in achieving this purpose.
5. Price analysis 5/9: BTC, ETH, BNB, XRP, SOL, ADA, LUNA, DOGE, AVAX, DOT.
BTC and many altcoins are fast approaching the “capitulation phase,” which is typically followed by the market finding a bottom.BTC/USDT
Bitcoin plummeted below the ascending channel on May 5 and has continued lower, indicating that bears are in no mood to let go of their advantage. The price has dipped below the critical support at $32,917 but the bears may face a strong challenge from the bulls at lower levels.
If the price rebounds off the current level, the relief rally could reach the 20-day exponential moving average (EMA) ($37,670). This is an important level to watch out for because if the price turns down from the 20-day EMA, it will suggest that the sentiment remains negative and traders are selling on rallies.
The bears will then make another attempt to pull the BTC/USDT pair to the critical support at $28,805. This level is again likely to attract buying by the bulls.
On the upside, a break and close above the 20-day EMA will be the first indication that the selling pressure may be reducing. That could clear the path for a possible rally to the 50-day simple moving average (SMA) ($41,279).
ETH/USDT
Ether (ETH) broke below the uptrend line on May 7. This move invalidated the developing ascending triangle pattern. The breakdown of a bullish pattern is usually a bearish sign as stops of several bulls who may have purchased in anticipation of a breakout from the pattern being triggered.
Strong selling has pulled the price below the immediate support at $2,445. This opens the door for a possible drop to the critical support zone between $2,300 and $2,159. The bulls are likely to defend this zone with all their might because a break below it could sink the ETH/USDT pair to $1,700.
If the price rebounds off the support zone, the bulls will make an attempt to push the pair above the 20-day EMA ($2,790). If they succeed, it will suggest that the bears may be losing their grip. The pair could then rally to the 50-day SMA ($3,043).
BNB/USDT
BNB has witnessed sustained selling for the past few days. The bears pulled the price below the strong support at $350 and are now challenging the critical level at $320.
A break and close below $320 would be a huge negative as this level has not been breached since August 2021. There is a minor support at $300 but if this level fails to arrest the decline, the BNB/USDT pair could plummet to $250.
Alternatively, if the price rebounds off $320, the bulls will try to push the pair above $350 and challenge the 20-day EMA ($383). The buyers will have to clear this hurdle to signal that the decline could be over. The pair could then rise to the 50-day SMA ($409).
XRP/USDT
Ripple (XRP) turned down from the 20-day EMA ($0.63) on May 5 and dipped below $0.62. The buyers attempted to push the price back above $0.62 on May 6 but the bears held their ground.
The XRP/USDT pair continued its decline and has broken below the support at $0.55. This clears the path for a retest of the psychological support at $0.50. The buyers are expected to defend this level with vigor because a break and close below it could start a downtrend that could sink the pair to $0.42.
Conversely, if the price rebounds off the $0.50 support, the bulls will again attempt to drive and sustain the pair above the 20-day EMA. If they succeed, it will suggest that the selling pressure could be reducing.
SOL/USDT
The failure of the bulls to push Solana (SOL) above the 20-day EMA on May 5 may have attracted strong selling by the bears. The price continued its downward move and has slipped below the strong support at $75.
If the price sustains below $75, it will suggest the start of the next leg of the downtrend. The SOL/USDT pair could first decline to $66 and next to $58. If the price rebounds off this zone, the buyers will try to push and sustain the pair back above $75. If they manage to do that, it will suggest that the downtrend could be ending.
On the contrary, if the recovery stalls at $75, it will suggest that bears have flipped the level into resistance. If that happens, the bears will attempt to resume the decline.
ADA/USDT
Cardano (ADA) rose above the 20-day EMA ($0.81) on May 4 but the bulls could not sustain the higher levels. The price turned down on May 5 and broke below the strong support at $0.74 on May 8.
This suggests the resumption of the downtrend. The ADA/USDT pair could now decline to $0.64, which could act as a support. If the price rebounds off this level, the bulls will again try to push the pair above the 20-day EMA. If they succeed, it will suggest that the break below $0.74 may have been a bear trap.
On the contrary, if the relief rally stalls at $0.74 or the 20-day EMA, it will suggest that bears are active at higher levels. The sellers will then attempt to sink the pair to the psychological support at $0.50.
LUNA/USDT
Terra’s LUNA token turned down from the downtrend line on May 5 and plunged below the strong support at $75 on May 7. This completed the bearish head and shoulders pattern, suggesting the start of a new downtrend.
The long tail on the May 7 and 8 candlestick suggests that bulls purchased at lower levels but the failure to start a recovery shows that bears are in no mood to let go of their advantage. The pattern target of this topping formation is $50. This level is likely to attract strong buying by the bulls.
If the price rebounds off $50, the bulls will attempt to push the LUNA/USDT pair toward the breakdown level at $75. If the price turns down from this level, the pair may form a range between $50 and $75.
DOGE/USDT
Dogecoin (DOGE) turned down from the 20-day EMA ($0.13) on May 7, indicating that bears continue to sell on rallies. The selling picked up momentum on May 9 and the bears have pulled the price below the strong support at $0.12.
The downsloping 20-day EMA and the relative strength index (RSI) in the negative territory indicate advantage to sellers. If bears sustain the price below $0.12, the DOGE/USDT pair could slide to the psychological support at $0.10.
If the price rebounds off $0.10, the buyers will try to push the pair above $0.12 and challenge the 20-day EMA. A break and close above the 20-day EMA could be the first indication that the pair may remain stuck between $0.10 and $0.17 for some time.
Contrary to this assumption, if bears sink the pair below $0.10, the selling could intensify and the decline could extend to $0.06.
AVAX/USDT
Avalanche (AVAX) turned down from the 20-day EMA ($63) on May 5 and has plunged below the critical support at $51. If bears sustain the price below $51, it will indicate the resumption of the downtrend.
There is a minor support at $47 and then at $43. If the price turns up from either support, the buyers will try to push the AVAX/USDT pair back above $51. If they succeed, the pair could recover to the 20-day EMA, which is an important level to keep an eye on.
If bulls push the price above the 20-day EMA, it will suggest that the bears could be losing their grip. The pair could then attempt a rally to the 50-day SMA ($77).
Alternatively, if the recovery falters at the 20-day EMA, it will suggest that the sentiment remains negative and traders are selling on rallies. The bears will then again try to resume the downtrend.
DOT/USDT
Polkadot’s (DOT) tight range trading between $14 and $16 resolved to the downside on May 7, indicating that the bears have overpowered the buyers.
The DOT/USDT pair could now drop to the crucial support at $10 where the bulls are expected to mount a strong defense. Although the downsloping 20-day EMA ($15.54) signals advantage to bears, the RSI in the oversold territory suggests a recovery may be around the corner.
If the price rebounds off $10, the bulls will attempt to push the pair above the 20-day EMA. If they manage to do that, it will be the first sign that the selling pressure may be reducing.
Alternatively, if the price turns down from the 20-day EMA, it will suggest that bears continue to sell on rallies. The bears will then again attempt to sink the pair below the strong support at $10. If they do that, the pair could slide to $7.16.
