Good morning! Here's what happened:
Prices: Bitcoin makes a small comeback on Sunday.
Insights: crypto firms could face more scrutiny in Singapore.
Technician's take: BTC is on track for its first consecutive seven-week decline.
Prices
Bitcoin (BTC): $31,122 +3.5%
Ether (ETH): $2,139 +4.5
Biggest gains
| Asset | Ticker | Yields | DACS sector |
|---|---|---|---|
| Cosmos | ATOM | +14.1% | Smart contracts platform |
| Solana | SOL | +13.6% | Intelligent contract platform |
| Cardano | ADA | +12.7% | Smart contracts platform |
Biggest losers
| Asset | Ticker | Earnings | DACS sector |
|---|---|---|---|
| Bitcoin Cash | BCH | -3.4% | Currency |
Bitcoin recovers
It wasn't much for a comeback. But Bitcoin will take what it can get.
The same is true for other cryptocurrencies, which have been pressured in the past week by the toxic mix of geopolitical turmoil, rising interest rates, recession fears and the implosion of the TerraUSD (UST) stablecoin and its underlying token, LUNA.
Bitcoin recently traded above $31,000, up nearly 6% in the last 24 hours and more than 16% from the $26,600 low to which it had fallen in mid-Friday. "Bitcoin was indeed under downward pressure, losing $30,000 support but not falling below $25,000," Joe DiPasquale, CEO of crypto fund manager BitBull Capital, wrote to CoinDesk.
Ether, the second-largest cryptocurrency by market cap, recently rose in a similar fashion, changing hands at around $2,100 after falling below $1,800 for the first time in two months. Most major altcoins spent Sunday in the green, making up some of the ground they lost last week when cryptocurrencies' market capitalization plunged by $300 billion. SOL rose more than 10% at times, although its price had fallen to $55 from more than $70 earlier in the week.
ADA, AVAX and AXS posted gains between 9% and 11%. BCH was among the few losers early Sunday.
The cryptocurrencies' gains matched the stock markets, which finally got some good news on Friday after six consecutive days of declines. The tech-heavy Nasdaq closed up 3.8%, while the S&P 500 and Dow Jones Industrial Average gained 2.3% and 1.4%, respectively. Still, the week's bad economic news is unlikely to sway investors from their risk-averse stance of recent months.
On Wednesday, the U.S. Commerce Department announced that consumer prices rose 8.3% in April, slightly better than the previous month but still a sign that inflation will persist across a range of goods and services. Even the once-thriving housing market has been rocked by mortgage rates rising above 5.3%, making it increasingly difficult for potential homeowners to finance their purchases. Investors have been concerned that the Federal Reserve's restrictive stance is not enough to tame rising prices without plunging the economy into recession.
In an email Friday, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, highlighted investor concerns about inflation and supply that have sent the U.S. bond price down to a fraction of a cent. "Right now, the wild west of cryptocurrencies is taking a breather after recovering from the crash triggered by the collapse of a so-called stablecoin," Streeter wrote, adding, "This latest tumble in the wheel of fortune shows that speculation in cryptocurrencies is extremely risky and not suitable for investors who don't have money they can afford to lose.
BitBull's DiPasquale noted that "a short-term bounce" in bitcoin "is still intact, but a proper reversal needs more buying activity." He called last week's low "a decent buying opportunity for long-term exposure," but also warned that "the coming month could bring additional volatility as more concrete steps by the FED to fight inflation come to the fore."
Markets
S&P 500: 4,023 +2.3%
DJIA: 32,196 +1.4%
Nasdaq: 11,805 +3.8%
Gold: $1,811 -0.5%
Insights
Singapore will keep an eye on locally registered crypto companies
At the close of the week in Asia, LUNA and UST were removed from most exchanges as the Terra blockchain was halted for nine hours (currently resuming) and the market seemed to reject a recovery plan.
The question many are asking is how will token holders be compensated? And this is where it gets complicated.
Terraform Labs, the Singapore-registered company behind the Terra Protocol, does not have a permanent address. The Singapore address listed is a registration office that houses hundreds of Singapore companies. The offices are rented co-working spaces around the world; as with many Web 3 startups, there is no official headquarters.
The only assets the company has come from Luna Foundation Guard. This nonprofit, also registered in Singapore and led by Do Kwon, controls the wallets that were supposed to prop up the UST peg in times of extreme volatility. Most of those wallets are now empty, and the only remaining value is the roughly $69 million in Avalanche tokens (AVAX).
Singapore regulators are aware of the trend of crypto companies using a Singaporean entity to conduct business overseas that has no significant ties to the country. In April, Parliament passed a bill that included provisions requiring domestically registered crypto companies doing business abroad to be licensed primarily for anti-money laundering reasons, but left the door open for expansion in the future.
At the beginning of the year, Terra's LUNA token had a market cap of $33 billion. Its UST stablecoin had a market cap of $10 billion. Now that the Terra blockchain has been stopped - perhaps forever - both have a virtual value of $0.
What kind of assets could be seized if token holders file a legal case against the companies behind the protocol? What jurisdiction does the Singapore government have over Do Kwon and co-founder Daniel Shin? In corporate filings with local authorities, both give a Singapore address, but it is unclear whether they have their primary residence there, as Kwon also maintains a residence in South Korea.
In their lawsuit against the Securities and Exchange Commission (SEC), Terraform Labs and Do Kwon argued that U.S. regulators do not have jurisdiction over Kwon, a Korean who lives in Singapore. They have no ties to the U.S., so how can they be targeted by regulators? they argued. But they could be up against Singapore's judicial system, and while the country has a favorable securities trading framework compared to the U.S., its courts are known to be otherwise strict.
If the Singaporean government feels that the country's reputation is at stake because a registered company with few material connections blew up tens of billions of dollars, it will crack down on them and possibly start closing the door altogether on crypto companies that use a Singaporean shell but do business abroad.
Will Terraform and Kwon also take the "lack of jurisdiction" route in this case?
Technicians' opinion
Bitcoin oversold, resistance at $33K-$35K.
Bitcoin (BTC) bounced towards $30,000 on Friday as buyers reacted to oversold conditions. Still, the uptrend seems limited and the cryptocurrency could face resistance at $33,000 and $35,000.
Momentum signals on the daily, weekly, and monthly charts remain negative, which usually leads to a period of low or negative returns. In addition, according to Coinbase (COIN) price data provided by TradingView, BTC is on track for its first consecutive seven-week decline dating back to 2014. This is also a sign of negative price momentum.
Currently, BTC is approaching lower support near its 200-week moving average, now at $21,800. Immediate support lies between $27,000 and $30,000, which could stabilize price action in the coming days.
Short-term counter-trend signals also appeared on the charts on Thursday, which usually lead to a short price increase.
The Relative Strength Index (RSI) on the weekly chart is more oversold than it has been since March 2020, although strong resistance and negative momentum point to a limited uptrend in the coming months.
Key events
Stronghold Digital: first quarter earnings
Mawson first quarter results
Cosmos Gateway Conference
CoinDesk TV
In case you missed it, here's the latest episode of First Mover on CoinDesk TV:
Crypto panic subsides, bitcoin, many cryptos see green, lessons learned from UST shock
"First Mover" continued to look at the UST stablecoin debacle and its impact on crypto markets. Prices of BTC and other cryptocurrencies rose, but the outlook is uncertain. And what lessons were learned? Host Christine Lee was joined by Michael Coscetta of Paxos, which has a different type of stablecoin than UST, and Benoit Bosc of GSR with his market analysis.
Headlines
Do Kwon's proposed Terra 'revival' puts UST and LUNA holders in charge: a "revival plan" presented Friday by the CEO of Terraform Labs would redistribute ownership of the network.
Terra Blockchain resumes after 9-hour disruption: Blocks 7607790 and 7607791 were transferred at around 11:27 UTC on Friday.
Coinbase, MicroStrategy and other crypto stocks finally see some relief after recent losses: shares of many crypto stocks have been hit hard this week.
Elon Musk stalls on Twitter deal after putting it on hold: The landmark deal that would have seen Elon Musk acquire Twitter and take it private has stalled as Musk seeks to have the number of fake accounts verified.
Crypto-related stocks in Asia see volatile trading amid bitcoin recovery: Amid this week's price slump, investors in traditional markets have taken a risk on listed companies related to the crypto sector.
Longer Reading
Why the Fed will return to easy money: Amid a recession and political paralysis, the Federal Reserve will have no choice but to return to quantitative easing. What will this mean for cryptocurrencies like bitcoin?
Today's crypto explainer: bitcoin mining difficulty: everything you need to know
Other Voices: Why is crypto crashing? Analysts name the main reasons for this week's implosion (Fortune)
Said and heard
"It's a sobering moment for those of us watching the crypto business. I've spent a lot of time over the past two years pointing out absurdities in the seething crypto market (including predicting the failure of Luna), but I'm still a bit shocked at how exposed civilians have been to one of the industry's most experimental projects. And to be clear, the crypto industry is still best viewed as entirely experimental." (CoinDesk columnist David Z. Morris) ... "The demise of UST as an algorithmic stablecoin is a Black Swan event and should never have happened. It was a project worth over $18 billion - practically too big to fail. Stronger regulatory controls overseeing the project's automated trading system could have defused the situation long ago." (Fluid CEO Ahmed Ismail, for CoinDesk) ... "It's hard to say, 'Is this Lehman Brothers?' We're going to need some more time to figure that out. You can't react with that kind of speed." (Paxos co-founder Charles Cascarilla, quoted in the New York Times) ... Saudi Aramco posted its biggest profit since listing in 2019 as global oil and gas prices soar....In a press release, the company said it was buoyed by higher prices and a surge in production. The invasion of Ukraine has sent oil and gas prices soaring. Russia is one of the world's largest exporters, but Western countries have pledged to reduce their dependence on the country. Oil prices were already rising before the Ukraine war, as the economy began to recover from the Covid pandemic and demand outstripped supply. Other energy companies, including Shell, BP and TotalEnergies, also reported rising profits as a result, even as many of them face costs from exiting the business in Russia." (BBC)