Good morning and welcome to First Mover. I'm Brad Keoun, here to guide you through the latest crypto markets, news and insights. (Lyllah Ledesma is out this week).
- Price Point: Bitcoin has so far avoided a steeper plunge below $30,000, but it's still on pace to extend its losing streak to a record eight weeks.
- Market Movements: Data from the bitcoin options market shows that traders are more bearish, reports Shaurya Malwa.
- Feature: the collapse in $LUNA tokens was only part of the story. Crypto traders are rushing to the exits of DeFi apps on the Terra blockchain, Malwa reports.
Price Point.
Cryptocurrency markets are currently going through their worst phase ever - and it's not over yet.
Bitcoin (BTC) is down 3.2% since Sunday and is on track to extend an already record seven-week losing streak.
It's worth noting that the largest cryptocurrency has shown resilience around the $30,000 mark. But since last week's sell-off triggered by the collapse of the Terra blockchain and LUNA tokens, bitcoin has not really recovered.
Bitcoin fell to almost $24,000 in the meantime, but was changing hands around $30,300 at press time. There wasn't much relief on the economic front, where growing concerns about a U.S. recession collide with a Federal Reserve that says it is determined to curb fast-rising inflation even as U.S. stocks appear headed for a bear market.
The cryptocurrency's correlation with stocks has strengthened recently - in part because so many traditional investors are now trading it - so bitcoin is likely to come under further pressure from any tightening in financial conditions.
Wall Street firm Goldman Sachs released a report predicting that the recent plunge in cryptocurrency prices will not, in itself, be a major drag on the economy.
Nevertheless, regulators are increasingly concerned about the growing risks of cryptocurrencies. A statement released by the G7 called for stricter anti-money laundering and reserve disclosure rules following the collapse of stablecoin terraUSD last week, CoinDesk's Jack Schickler reported Friday.
In traditional markets, U.S. stock futures pointed to gains at Friday's market open after China cut its benchmark interest rate, a form of economic stimulus.
Market Movements.
By Shaurya Malwa
Bitcoin (BTC) options activity indicates a growing bearish sentiment among investors.
The asset's price movements have been highly correlated with U.S. markets in recent months, with poor earnings reports and aggressive comments from the Federal Reserve (Fed) impacting bitcoin prices. Investors are placing their bets accordingly.
The put/call ratio for open interest in bitcoin hit a 12-month high of 0.72 yesterday, research firm Delphi said in a note Friday, adding that the data "indicate bearish sentiment among investors. A similar ratio was reached last May. (A put option is generally a bet on a price decline, while a call option is a bet on a price increase.)
"The put/call ratio measures the amount of put option purchases relative to call option purchases," Delphi analysts explained in the note. "A high put/call ratio suggests that investors are speculating on whether bitcoin will continue to sell off, or it could mean that investors are hedging their portfolios against a downtrend."
"Last April, the put/call ratio was 0.96 before the bitcoin price fell more than 50% in May 2021," the firm added.
Last Headlines.
- To facilitate cross-border payments, you need to change your entire mindset, the authors of the BIS study said.
- Goldman sees little impact on U.S. economy from lower cryptocurrency prices The decline in the stock market had a much bigger effect on U.S. household net worth, the bank said.
- UK regulator will take Terra Coins collapse into account in new crypto rules: Report Market instability in stablecoins must be taken into account, FCA executive director for markets said.
- Bitcoin Options Data Suggests Bearish Sentiment Among Investors Put/call ratio for Bitcoin options reached yearly highs on Thursday, data shows.
Feature:It's Not Just LUNA. Terra's DeFi apps have gobbled up $28 billion
By Shaurya Malwa
In the two weeks since Terra's U.S. dollar-linked stablecoin terraUSD (UST) lost its peg, resulting in massive losses for investors, billions of dollars have been drained from the ecosystem.
Data from trackers show that funds held in Terra-based decentralized financial applications (DeFi) have plummeted to $155 million in locked value as of Friday morning, a level last seen in February 2021, from more than $29 billion earlier this month. Terra DeFi's locked-in value peaked at $30 billion in early April.
The declines came as the UST lost its 1:1 peg to the U.S. dollar amid a general market slump. This led to a death spiral as investors exchanged UST for other stablecoins, sending the Terra token to a low of 4 cents on May 14.
"Suffering significant losses or seeing others suffer significant losses - through no fault of their own - is probably one of the fastest ways for a protocol or blockchain in this space to lose community trust," Simon Furlong, co-founder of Geode Finance, told CoinDesk in an email.
Link to full story: It's Not Just LUNA. Terra's DeFi apps have gobbled up $28B
Today's newsletter was edited by Brad Keoun and produced by Parikshit Mishra and Stephen Alpher.