Good Morning. Here's what happened:
Prices: Bitcoin and other major cryptocurrencies plummet.
Insights: Nvidia has a dour relationship with the crypto industry.
Technician's take: BTC's collapse is confirmed, and the uptrend seems limited.
PricesBitcoin
(BTC): $31,199 -8.5%
.Ether (ETH): $2,305 -8.8%
Biggest Winners
There are no winners today in CoinDesk 20.Biggest Losers
| Asset | Ticker | Income | DACS Sector |
|---|---|---|---|
| Algorand | ALGO | -15.7% | Smart contracts platform |
| Litecoin | LTC | -15.1% | Currency |
| Cardano | ADA | -15.0% | Platform for smart contracts |
Another difficult day for cryptocurrencies
And the slide continues.
Bitcoin continued its slide in Monday trading, falling to levels it hasn't seen since early July and is at less than half its price from late November, when it approached $70,000.
The euphoria of broader adoption and growing institutional interest combined with increasing awareness of blockchain-driven projects has long since faded, replaced by fears of higher interest rates, geopolitical turmoil and a looming recession. The largest cryptocurrency by market value recently traded at just over $31,000, having previously fallen well below that threshold. However, Bitcoin's plunge of more than 8.5% in the last 24 hours was better than most other major cryptocurrencies on Monday, as investors fled assets with even a hint of risk. The riskier the asset, the faster the exit.
Terra's LUNA token lost more than 30% in the same period after Luna Foundation Guard, the Singapore-based nonprofit created to support the Terra network, tweeted that it would borrow $1.5 billion in bitcoin (BTC) and terraUSD (UST) to defend its algorithmic stablecoin's peg to the U.S. dollar. CRO plunged more than 16% at times. ADA and DOT fell by about 14%.
Ether, the second largest cryptocurrency by market cap, was more resilient, roughly mirroring BTC's more modest decline. Trading volume rose slightly, reflecting increasing seller activity, although it remained far from the highs of 2022 earlier in the year. The Fear & Greed Index remained in the extreme fear range it had been in for the past few months. This was due to increasing investor concerns about inflation, central bank monetary tightening that could plunge the global economy into recession, and the widening aftermath of Russia's unprovoked invasion of Ukraine. The daily, weekly and monthly charts for bitcoin have all turned negative.
The carnage in cryptocurrencies followed steep declines in equity markets: The tech-heavy Nasdaq fell more than 4.3%, the S&P 500 fell 3.2%, and the Dow Jones Industrial Average fell nearly 2%. Even gold, a safe haven that usually rises in times of crisis, fell 1.5%.
Mark Lurie, CEO of crypto trading software provider Shipyard Software, noted the impact of Terra's announcement, but called it "noise compared to the macro story" that is attracting "growth stocks" like Amazon (AMZN), Alphabet (GOOG), Google and some of the biggest names in the tech industry.
"This macro decline is likely due to two converging reasons."
Lurie wrote that the macro decline was due to rising interest rates making "safer assets more attractive" and pulling "capital out of growth stocks." But he also pointed to the easing of pandemic restrictions, which has reduced consumer reliance on technology. "Many people are returning to offline buying behavior, which is hurting e-commerce and tech stocks that performed best during the lockouts," he wrote.
MarketsS&P500
: 3.991 -3.2%
DJIA: 32,245 -1.9%
Nasdaq: 11,623 -4.2%
Gold: $1,852 -1.
5%InsightsWhy Nvidia downplayed its mining business
.Nvidia (NVDA) has always had a strained relationship with cryptocurrencies, and the decision to rewrite history cost the company $5.5 million.
In the late 2000s, its graphics processing units (GPUs), designed primarily for gaming, found a second life: Their parallel processing capability, used to create photorealistic graphics for games, meant they could handle large amounts of data with ease, opening up a new world of computing.
General Purpose GPU Compute, or GPGPU Compute, is responsible for the AI and Big Data boom. These GPUs were a requirement for virtually every data center, and Nvidia's stock went up like a rocket with this demand.
GPGPU also meant that GPUs were essential for mining cryptocurrencies. First Bitcoin and then Ether.
As we all know, demand during the first crypto boom of 2016-2018 led to a massive shortage of graphics cards. Gamers and PC enthusiasts were upset because the latest graphics cards were not available, which meant they had to play with yesterday's technology.
And Nvidia did everything it could to write this out of history. While Nvidia makes a special mining card, it discourages mining with its regular gaming cards and tries to disable the ability to mine with them. This leads to a back-and-forth between the company and miners trying to get around this block.
Nvidia's exasperation with mining also led the company to downplay the impact of mining on its business in U.S. Securities and Exchange Commission filings, attributing it to gaming.
This was a curious decision by Nvidia, as the fluctuations in cryptocurrency were easily seen in the share prices of its graphics card makers in Asia. Shipments of new high-end motherboards, a key component for PCs, didn't seem to match the market's insatiable demand for GPUs, suggesting that the market wasn't asking for high-end gaming PCs, just a component.
While Nvidia develops the graphics processing unit (GPU) at the core of a graphics card, companies in Taiwan make the circuit board to which those cards are attached, called the "graphics card" (sometimes referred to by analysts as an add-in board).
Gigabyte, Micro-Star International (MSI) and Zotac (the parent company is listed in Hong Kong as PC Partner Group) are some of the biggest names in this industry. Normally, these are relatively boring stocks, as they are manufacturing companies working on behalf of chip designers like Nvidia.
Nvidia, not Gigabyte, makes the proprietary and valuable part of a graphics card, and Gigabyte's relatively low revenue and profit margins reflect that.
The fortunes of these companies changed during the crypto boom of 2017-2018, when miners needed every graphics card they could get their hands on to profit from the then-emerging Ethereum protocol and its role in the initial coin offering (ICO) bubble.
Investors looking to get in on the action bought as many shares of Gigabyte, MSI (2377) and PC Partner (1263) as they could. The number of cryptocurrency investment vehicles was limited at the time, as there were no registered crypto custodians yet. In November 2017, Bloomberg specifically identified these stocks as opportunities for investors seeking a macro proxy for crypto.
Eventually, the ICO bubble burst and a crypto crash ensued. Those familiar with Bitcoin's history know that the crypto winter of 2018 was a particularly cold one, as prices fell significantly and did not recover for a long time.
Shares of Gigabyte, MSI, and PC Partner plummeted as quickly as they had risen. Demand from mining companies fizzled overnight, and analysts warned that these companies would be in dire straits with layoffs and restructuring. Nvidia called this a "crypto hangover" and took a $23 billion write-down on excess inventory it simply could not sell. Nvidia competitor AMD (AMD) had the same problem.
Although the significant impact of cryptocurrency on Nvidia's bottom line was obvious to informed observers (it's not clear why the SEC is only now looking into it), the company tried to hide it. The reason for this decision is likely that the data center and enterprise businesses have proven to be stable revenue pillars and the company did not want investors to be spooked.
The question is: Will history repeat itself as we head toward another crypto winter?
Tech opinionBitcoinunder
pressure; support at $27K-$30K
.Bitcoin (BTC) has confirmed a break below its short-term uptrend and is now targeting lower support at $27,000 and $30,000. Sellers may remain active given the weakening upside momentum on the daily, weekly and monthly charts.
BTC is down as much as 11% in the last 24 hours and 20% in the last week.
In addition, Bitcoin is down about 50% from its all-time high of $69,000 reached last November, compared to an 80% peak-to-trough decline during the 2018 crypto bear market. At this point, price action does not point to a major cycle low.
The Relative Strength Index (RSI) on the daily chart is more oversold than it has been since January 24, when a relief rally occurred. This time, however, BTC is at risk of breaking below its one-year price range, meaning buyers could continue to take profits on short-term rallies.
ImportantEventsBitcoin mining company
CleanSpark: first quarter results
.Coinbase first quarter results
3 p.m. HKT/SGT(7 a.m. UTC):China new loans (April)
CoinDeskTVIn
case you missed it, here is the latest episode of "First Mover" on CoinDesk TV
:Bitcoin, Broader Crypto Slide Continues, Where's the Bottom? LFG borrows $1.5B in BTC to defend UST
What's going on in the crypto markets? "First Mover" analyzed the markets and spoke with industry executives in key markets to discuss the reasons for the dramatic slide, how long it can continue, and what to make of recent news about the stablecoin UST, which briefly lost its peg to the U.S. dollar over the weekend. Guests included Cory Klippsten, CEO of Swan Bitcoin, Steven McClurg, chief investment officer and co-founder of Valkyrie, and Maxim Galash, CEO of Coinchange.
HeadlinesBitcoin funds had surprising inflows as markets crashed: About $45 million flowed into these funds in the week ending May 6. Investors apparently bought the market weakness.
Bitcoin plunges to its lowest price since July 2021 as market panic mounts: Cryptocurrencies slumped across the board all weekend and added to their losses Monday morning as global stock markets swooned.
Coinbase faces Q1 results as crypto markets weaken: Coinbase's first-quarter results could show some weakness as crypto prices continue to decline.
Mark Zuckerberg says Instagram will test NFTs starting this week: Meta (FB) is also working on 3D augmented reality NFTs that will be compatible with Instagram Stories.
Luna Foundation Guard Borrows $1.5B in BTC and UST for Stablecoin Peg: The move comes after UST briefly lost its peg to the US dollar over the weekend.
Longer ReadingWhy
on earthwould land be scarce in the metaverse? With their "skeuomorphic" approach to real estate, Web 3 metaverse projects may have fallen into a trap of their own making.
Today's crypto explainer: can crypto go green? How to invest in green cryptocurrencies
Other voices: Making money with crypto? Yes, the IRS expects a cut (CNN)
Said and heard
"The project never took off, in part because Facebook burned its reputation selling our data and potentially destabilizing democracy. So regulators around the world acted on our behalf and said that Facebook - with its billions of users and its entrenchment on the Internet - could not be trusted with a radical new attempt at currency creation. [Nouriel] Roubini's project is similarly ambitious - he wants to create an alternative safe haven to U.S. Treasury securities that also has "payment functions." It could also offer a yield that makes it more attractive to hold, though Roubini notes in a blog post that USG's fluctuating value could limit its use as a means of payment." (CoinDesk columnist Daniel Kuhn) ... "A bear market for stocks begins, at least by most conventional definitions, when the S&P 500 is down 20% from its last peak. As of Friday afternoon, the index had lost nearly 14 percent since its record high on Jan. 3. A 2.7 percent drop in late morning trading Monday meant the index was now even closer to the threshold of a bear market." (The New York Times) ... "Investors are still analyzing disparate data on the financial health of consumers and businesses. The U.S. economy contracted 1.4% in the first quarter, the worst showing since the pandemic began in the spring of 2020, but consumer and business spending remained strong. Bank executives pointed to high spending in categories such as travel and entertainment as reasons for optimism. Market volatility resulting from higher interest rates and the war in Ukraine has affected the business of major banks. The market for initial public offerings has largely stalled in recent months." (The Wall Street Journal)