First Mover Americas: BTC Drops to 2020 Levels of $25K; Tether Loses $1 Peg

The latest moves in crypto markets in context for May 12, 2022.

AccessTimeIconMay 12, 2022 at 1:55 p.m. UTC
Updated May 11, 2023 at 5:39 p.m. UTC
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Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

  • Market Moves: Bitcoin traders took a beating overnight as long liquidations surged, while Tether's USDT stablecoin lost its $1 peg.
  • Feature: We take a look at what Terra thinks is the easiest way to return the UST to a peg.
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  • Price Point

    Bitcoin (BTC) briefly hit lows of $25,200 in the early hours of Thursday morning as Tether's stablecoin USDT lost its $1 peg, continuing this week's carnage in crypto markets.

    Bitcoin is trading down 20% over the last seven days and has not seen levels this low since December 2020.

    USDT, the world’s largest stablecoin by market capitalization, dipped to 97 cents in Asian trading hours, losing its parity with the U.S. dollar. It hit as low as 96 cents on Coinbase.

    Terra’s UST stablecoin also continued to flounder, hitting levels as low as $0.28, according to CoinDesk data.

    “UST de-pegging has caused market-wide ripple effects,” said Charles Storry, head of growth at Phuture, a crypto index platform. “What we are seeing now is panic. People running for the exits and losing faith.”

    In traditional markets, the S&P 500 has lost over 4.5% this week. The Nasdaq composite fell to its lowest level since November 2020, falling by more than 3%.

    Market Moves

    Over the last seven days, BTC has not pushed above the $35,000 mark, according to data from Messari.

    FM 5/12 #1

    Martha Reyes, head of research at Bequant, said in an email with CoinDesk that the markets in meltdown might present an opportunity for institutional players to start building positions and push stablecoin regulation to provide more confidence.

    “While we can't call the bottom and correlations among asset classes remain elevated, bitcoin has survived corrections of 70-80% in the past. This may be an opportunity for institutions to build positions at better levels,” said Reyes.

    She added: “The uncertainty around stablecoins is a concern and could lead to another flush-out but we may finally get the much-needed regulatory framework that could entice institutions in. Regulators tend to be reactive, so this may be the catalyst for greater stablecoin regulation.”


    BTC long liquidations took a beating overnight too. According to data from Coinglass, over the last 24 hours, $430 million was liquidated.

    Long liquidations took up $277 million and shorts accounted for $198 million.

    FM 5:12 #2.png

    “This is a standard event you see in conventional futures markets and is now taking its toll on the crypto markets due to the nascent asset and the lack of experienced investors using these instruments,” said Hashdex’s head of Europe, Laurent Kssis.

    According to Kssis, the fact that long liquidations are dominating the market could push the price of BTC down further.

    “$30,000 was the key support level, so $25,000 could be a resistance now the $30K level has been broken,” said Kssis.

    Latest Headlines

    Terra Proposes Token Burn and Increase in Pool Size to Stop UST Dilution

    By Sam Reynolds

    Terra believes that the downwards pressure on UST’s peg is diluting LUNA, impeding recovery for both while creating an excess of UST, and the way to solve this is through burning UST and increasing the available pool of LUNA.

    “The primary obstacle is expelling the bad debt from UST circulation at a clip fast enough for the system to restore the health of on-chain spreads,” said Terra in a Tweet.

    Algorithmic stablecoins like UST are supposed to be automatically pegged to the price of another currency. As explained in a prior CoinDesk learn article, traders can swap LUNA for UST at $1 regardless of the market price because the algorithms in the back end will manage the supply of LUNA creating enough scarcity to justify the $1.

    A token burn refers to taking crypto out of circulation on the blockchain. It can be thought of as a deflationary event, because it would increase the value of the remaining blockchain. For token holders, it would be a similar event to a share buyback.

    In a proposal put forward to token holders, Terra said that it wants to burn the nearly 1 billion UST (roughly $690 million) in the community pool while increasing the Base Pool of LUNA available to 100 million which in turn increases minting capacity to over $1 billion. This will help expedite the outflows of UST from the system, and thus pushing it back closer to its peg, while pushing down the price of Luna.

    “Currently, the burning of UST is too slow to keep pace with the demand for excess UST to exit the system, which is hindered by the BasePool size,” reads the proposal. “Eliminating a significant chunk of the excess UST supply at once will alleviate much of the peg pressure on UST.”

    Some comments on the proposal asked if this happened because of a bug in Terra’s coding, or if it was also a product of a broader market downturn driven by the decline in bitcoin’s price.

    Validators of the network are able to vote for this proposal. According to a vote tracker, the Yes side has received 50.47% of the vote while the abstain side has 49.1%. 87.8% of eligible voters have already cast a ballot, and the pass threshold is 50%.

    Today’s newsletter was edited by Lyllah Ledesma and produced by Parikshit Mishra and Stephen Alpher.


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    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Lyllah Ledesma

    Lyllah Ledesma is a CoinDesk Markets reporter currently based in Europe. She holds bitcoin, ether and small amounts of other crypto assets.

    Parikshit Mishra

    Parikshit Mishra is CoinDesk's Deputy Managing Editor responsible for breaking news coverage. He does not have any crypto holdings.

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