News Updates May 12, 2022

1. Bitcoin (BTC) Falls Below $27,000 to Reach Lowest Price Since 2020

Bitcoin (BTC) fell sharply this week to reach a low of $26,700 on May 12. This is the lowest price that it’s seen since December 2020.

Bitcoin had been trading inside a long-term ascending parallel channel since May 2021. In January 2022 BTC rebounded from the support line of the channel and reached a local high of $48,189 on March 28. 

The price has been falling since then, however, and it broke down from the support line of the channel during the week of May 9-16. 

Technical indicators are bearish. This is evident by the decreasing RSI, which is now considerably below 50 (red icon). Additionally, the weekly volume has been massive during the drop, despite there being several days left until the close.

 *Daily breakdown*

The daily chart shows that BTC has been falling at an accelerated rate since breaking down from a shorter-term channel on May 5 (red icon). 

On May 10, BTC rebounded off the $30,500 horizontal support area, which had been in place since May 2021. However, the bounce was short-lived and the price broke down on May 11 and has now reached a long-term low of $26,700.

Despite the daily RSI being extremely oversold, it has not generated any bullish divergence yet.

The two-hour chart shows that the price has been stuck beneath a steep descending resistance line since May 5. 

Unlike the daily chart, the RSI is more bullish, since it has broken out above its trendline and has generated a bullish divergence. Nevertheless, this is not nearly enough to counteract the bearish readings from the weekly and daily charts.

 *BTC wave count analysis*

The most likely wave count suggests BTC is in the C wave of an A-B-C corrective structure (red), which has been in place since the November 2021 all-time high. 

Giving waves A and C a 1:0.61 ratio would lead to a low of $25,950. If a bottom is not reached there, a 1:1 ratio could find a low being reached near $12,100.

2. BTC Below $27K, ETH Beneath $2K: Over $1.2 Billion in Liquidations

The total value of liquidations skyrocketed to over $1 billion in the past 24 hours as the crypto market collapsed.

The entire crypto market is covered in red once again, with countless double-digit losses evident across almost all charts. Bitcoin dumped by 15%, while the altcoins have it even worse with Solana, Ripple, Dogecoin, Shiba Inu, Avalanche, and, of course, Terra, leading the negative trend.

* It’s safe to say that the crypto market is in a state of freefall now, and it has been this way for the past week or so. CryptoPotato has frequently reported the massive price drops, which took bitcoin from $40,000 to below $30,000 in this period.

* However, the past 24 hours were violent once more. After news broke about the new inflation numbers within the US, BTC dropped below $30,000, surged above that level, and plummeted once more.

* This resulted in marking a new year-and-a-half low below $28,600 as reported yesterday evening, but the situation only worsened as BTC dipped to $26,500 a few hours back.

* Somewhat expectedly, the altcoins have capitulated even more. Ethereum is down by more than 20% to well below $2,000. Binance Coin dumped by 25% to $235. Even more massive drops are evident from Ripple (-30%), Solana (-36%), Cardano (-32%), Dogecoin (-30%), Avalanche (-35%), and Shiba Inu (-35%).

* The market’s most significant loser – Terra – has plummeted to below $0.30 as of writing these lines. After the UST drama, LUNA has lost about 99% of its value in a week.

• These developments have led to a high number of liquidations and liquidated traders, with over $1.2 billion wrecked in the past 24 hours, while over 430,000 traders saw their positions liquidated.

3. Crypto Carnage: Could TRX Be Next After LUNA?

The whole crypto market is now experiencing a severe carnage, with certain cryptocurrencies bearing the brunt of the pain more than others. Terra (LUNA) is one of these cryptocurrencies, which lost more than 70% of its market value in less than 24 hours. The Terra blockchain native stablecoin, UST, a programmable stablecoin, has also taken a hit as a consequence of the significant price decrease, losing its peg to the US dollar twice in less than 48 hours.

With the damage done and Terra trying all it can to recover, it seems that the selloff movement is now focusing its attention on TRON as the next victim. According to live trading activity on Binance, the financing rate for shorting TRON (TRX) has already surpassed the 100 percent annual percentage rate (APR), and many traders are now eager to short. As of the time of this writing, TRX has lost more than 18% of its value in the previous 24 hours.

 *Fighting the crash*

To avoid finding itself in the same situation as Terra (LUNA), the Tron DAO Reserve is currently investing 2 billion USD to combat those who are shorting the cryptocurrency. The TRON DAO Reserve, which has a total reserve of $10 and serves as a lender of last resort, is responsible for stabilizing the exchange prices of centralized and decentralized stablecoins on the TRON blockchain.

4. NFT prices crumble as crypto market enters downturn. 

Prices of non-fungible tokens (NFTs) have declined this week as the TerraUSD (UST) algorithmic stablecoin's de-pegging heaps pressure on cryptocurrency markets. 

The popular Bored Ape Yacht Club (BAYC) has seen its floor price — a measure of the cheapest NFT in the collection – drop by 25% over the past week to 88 ETH ($1.7 million), according to data compiled by The Block. CryptoPunks' floor price is down 15% to 52.5 ETH over the same period. 

The entire crypto market has seen a weakening in sentiment this week as the TerraUSD (UST) algorithmic stablecoin lost its peg to the dollar on Monday. Bitcoin is now trading below $30,000 while ether has fallen below $2,000 and other tokens have also come under pressure. 

The declining price of ether means that NFT investors have seen the value of their holdings fall even further in dollar terms. 

5. Arca Pounces on UST Buying Opportunity After Stablecoin’s Collapse. 

Crypto fund Arca is probably one of the many currently suffering considerable fallout after the collapse of the Terra blockchain’s LUNA-powered stablecoin, UST.

This comes after the firm, which manages $500 million in assets, sent out a note on Tuesday telling its partners that it is certain that Terra’s UST stablecoin will eventually regain its peg. The firm concluded by stating that this is an ideal buying opportunity.

In the note, Arca also stated that it held an ad hoc investment and risk committee meeting to discuss the current situation.

On Monday night, UST was well below 63 cents, and LUNA was trading at $24.60.

6. Australia's First Bitcoin and Ether ETFs Flop, Here's Why? 

Australia's first cryptocurrency exchange-traded funds had an underwhelming debut earlier this Thursday.

The Cosmos Purpose Bitcoin Access ETF, ETFS 21Shares Bitcoin ETF (EBTC) and ETFS 21Shares Ethereum ETF (EETH) all launched on Cboe Global Markets earlier today.

The three investment vehicles attracted only a combined AUD$2 million (roughly $1.37 million) on their first day. ETFS 21Shares Bitcoin ETF (EBTC) was in the lead with AUD$954,925 ($655,000).

Kanish Chugh, head of distribution at ETF Securities, blamed the "relatively muted" trading volumes on the broader cryptocurrency market selloff.

Earlier today, Bitcoin careened to $25,401, the lowest level since December 2020, on the Bitstamp exchange. The cryptocurrency partially recovered to $27,851 at press time.

Chugh also pointed out that ASX Clear imposing "prohibitively expensive" margin requirements contributed to lukewarm demand. Major brokers have been pushed away from supporting the products due to 42% collateral.

7. Bitcoin Breaks Down to Dec-20 Lows, Here are The Critical Levels to Watch (BTC Price Analysis). 

The $30K demand zone – which was considered a significant level that could reverse the downturn and initiate an uptrend – has also failed and broken to the downside.

Bitcoin is currently trading around $28K, being massively oversold as indicated by values below 30% in the RSI indicator. In fact, the RSI has reached values last seen during the May 2021 crash. The price could experience a bullish pullback in the short term and retest the broken $30K level.

However, it’s entirely possible for it to continue on the downside towards the $24K and potentially the $20K level, which could finally mark a mid-term bottom. The 50-day and 100-day moving averages are also creating a bearish crossover, which could lead to bolster the probability of lower prices in the short term.

Bitcoin Open Interest
Bitcoin’s price has been crashing rapidly over the past couple of weeks and has even broken below the 2021 ($28K) bottom.

The futures market has certainly played a significant part in this massive drop, as Bitcoin’s open interest had very high levels, even though price was declining from $48K to $37K during April. This slow reduction in Open Interest during an approximately 20% drop was indicating that many stop losses and liquidation targets of long positions were positioned below the $37K, $33K, and ultimately $28K support level.

Following a price drop below these levels, many of the long positions got liquidated, causing a liquidation cascade that aggravated the selling pressure and lead to a stronger downtrend. However, the Open Interest is still much higher than May 2021 after the crash from the $64K ATH, which shows the futures market is still overheated, even after the recent downtrend.

This can be interpreted as a bearish signal, because a high Open Interest usually results in high volatility.

8. Treasury Secretary Janet Yellen to Discuss Stablecoin Today Amid TerraUSD (UST) Crash. 

Janet Yellen, the United States Treasury Secretary, is scheduled to testify later today before the U.S. House Committee on Financial Services. 

According to people familiar with the matter, while her testimony will still be based on the recently released Financial Stability Oversight Council’s (Council) 2021 annual report, there is a possibility that she will be asked several questions related to stablecoins during her testimony.

Ron Hammond, the Director of Government Relations at the Blockchain Association, stated this on microblogging platform Twitter today.

9. Masterminds Behind South African Bitcoin Ponzi Scheme Told to Pay Back Over $291 Million.  

Masterminds of one of South Africa’s biggest bitcoin Ponzi schemes, Mirror Trading International (MTI), have been asked by the scheme’s liquidators to pay back over $291 million to cover the scam operation’s debts.

Liquidators’ Influence
Liquidators of the South African bitcoin Ponzi scheme, Mirror Trading International (MTI), have issued summonses against eighteen individuals believed to be the masterminds behind the now-defunct scheme. The liquidators want the named individuals to pay back more than $291 million (4,666,077,528 rand) to cover the scheme’s debts, a report has said.

The move to summon the alleged MTI masterminds comes just a few months after liquidators unsuccessfully tried to have the online bitcoin trading platform declared an unlawful business by a South African court. As per a report by Bitcoin.com News, the move was frustrated by a slew of late court filings by lawyers representing MTI investors.

Investors were reportedly worried that the liquidators’ motion would give the latter excessive powers which may jeopardize their chances of recovering their funds. Following this intervention by investors, a South African judge subsequently postponed the hearing to a later date.

Masterminds Aware of MTI’s Insolvency
Meanwhile, a report by Mybroadband suggests that the liquidators have since asked the Pretoria High Court to hold MTI masterminds liable as per the dictates of the Companies Act. In their submission, the liquidators reportedly argued that summonsed individuals including the co-owners of MTI, Johann Steynberg and Clynton Marks, were aware the bitcoin trading platform was insolvent.

“[The defendants] were at all relevant times aware of the fact that MTI was trading in insolvent circumstances as well as of the actions perpetrated and constituting fraud upon MTI’s creditors,” the liquidators reportedly said in their summons.

Consequently, the liquidators assert that all the summonsed individuals must be held to account for their part in perpetuating MTI’s fraudulent business. Named the biggest crypto scam in 2020, MTI collapsed soon after its CEO Johann Steynberg disappeared with investor funds in late 2020. He was later arrested by Brazilian law enforcement in late 2021.

Following the online trading platform’s collapse, court-appointed liquidators have waged an ongoing battle against a group of investors opposed to the liquidation process. The group, which insists MTI is still solvent and thus should not be liquidated, wants the court to stop this process.

10. South Korea hopes to institutionalize crypto by 2024.

South Korea’s new administration under President Yoon Suk-yeol announced it plans to establish a new regulatory framework for crypto institutionalization to go into effect by 2024 after proposing legislation in 2023.