First Mover Americas: May Brings Showers Not Flowers as Bitcoin Languishes in Terra Aftermath

The latest moves in crypto markets in context for May 16, 2022.

AccessTimeIconMay 16, 2022 at 2:18 p.m. UTC
Updated May 11, 2023 at 5:41 p.m. UTC
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Good morning, and welcome to First Mover. I’m Brad Keoun, here to take you through the latest in crypto markets, news and insights. (Lyllah Ledesma is off this week.)

  • Market Moves: May was supposed to be a strong market for bitcoin. Instead crypto markets have been pummeled by the Terra blockchain crisis and ever-tighter Federal Reserve monetary policies.
  • Feature: Where did all that bitcoin go? The Luna Foundation Guard behind the "reserve" for Terra's UST stablecoin provides an update, but skeptics abound.

Price Point

The month of May is typically one of the strongest times of the year for bitcoin's performance, with an average 18% return over the past nine years.

But as crypto markets head into the back half of May, bitcoin is down 21% so far this month, currently around $30,000, and few analysts are predicting a quick rebound. CoinDesk's Shaurya Malwa reported Monday that bitcoin (BTC) has now fallen for a record seven straight weeks – a dismal stretch that's unparalleled in nearly a decade of pricing history on the largest cryptocurrency.

Aside from the epic collapse last week of the Terra blockchain's LUNA token and its UST stablecoin (more on that below), there appears to be little relief ahead from the direction of traditional markets. The Federal Reserve shows little inclination to ease back from tightening monetary policy aggressively to tamp down the hottest inflation in four decades.

Bitcoin has become increasingly correlated with U.S. technology stocks lately, so a hawkish Fed just puts more pressure on the cryptocurrency's price. (Economic data is expected this week on the state of U.S. manufacturing, retail sales and the housing market.)

"Adding to the downside is the bleak outlook for U.S. monetary policy, where no light at the end of the tunnel with rate hikes can be seen yet," FxPro market analyst Alex Kuptsikevich told Malwa in an email. "We expect the bears not to loosen their grip in the coming weeks."

U.S. stock futures were lower on Monday, along with European equity indexes.

Market Moves

Goldman Sachs Senior Chairman Lloyd Blankfein over the weekend offered an example of just how bearish the sentiment has become, stating the U.S. economy was at a “very, very high risk.” Such an environment could cause a drawdown in U.S. equities, which may spread to bitcoin and cause further sell-offs in the coming weeks if the current correlation continues.

"Multiple headwinds have given market players almost nowhere to hide in any asset class," David Duong, head of research for Coinbase Institutional, wrote in a note on Friday. "The downside scenarios are certainly still in play."

Duong says that from a price-chart perspective, bitcoin is in a “no-man’s land” with the next major technical support at the 200-week moving price average around the $22,000-23,000 area. "If things were to deteriorate further, the next line of support would come at around $20,000, which was the all-time high in the previous 2017/2018 cycle," according to Duong.

The debacle that was last week's destruction of more than $40 billion of value from the Terra collapse has left crypto traders rattled. The Crypto Fear & Greed Index from the website is registering "extreme fear." BitMEX founder Arthur Hayes described the Terra episode as "Luna Brothers Inc.," recalling the swift collapse of Lehman Brothers in 2008 that nearly brought down the global financial system. "With the so-called death spiral now halted, investors will be keen to see if tokens can maintain their price levels for the next few days at least," Simon Peters, a market analyst for the crypto trading platform eToro, wrote Monday.

That said, there may be more signs of contagion from the Terra fallout. Deus Finance's stablecoin dei (DEI) lost its peg with U.S. dollar and fell to as low as 54 cents in European hours on Monday, data shows. And the Wall Street firm Morgan Stanley wrote in a report last week that high-flying non-fungible tokens (NFTs) might be due for a reevaluation, arguing that the most speculative and leveraged areas of crypto markets are now in focus.

To be sure, the biggest hope for the bulls might come from reports of continuing interest in cryptocurrencies from Wall Street and institutional investors. Elwood Technologies, the cryptocurrency company backed by billionaire fund manager Alan Howard, raised $70 million in a funding round co-led by Goldman Sachs and Dawn Capital, CoinDesk's Ian Allison reported Monday.

"Retail investors are no longer alone in seeing the value of the sector, and in the background long-term investor plans are still being built," Peters wrote.

Latest Headlines

Luna Foundation Guard Left With 313 Bitcoin After UST Crash

By Sam Kessler

The Luna Foundation Guard (LFG), official stewards of Terra’s bitcoin reserves, released a statement on Monday documenting how it disbursed millions of dollars worth of crypto in its failed attempt to maintain the peg of stablecoin terraUSD (UST).

In the statement, LFG notes that its BTC reserves have depleted almost entirely – from around 80,000 BTC to about 300. The remaining assets, which are mostly comprised of the crashed UST and LUNA tokens, will apparently be used to compensate investors.

Monday’s statement from LFG comes amid criticism that Terra’s reserve funds – which were supposed to belong to the “decentralized” Terra community – were handled with a lack of transparency by Terra’s centralized leaders and investors.

It also comes after leading figures in the blockchain space, including Ethereum Founder Vitalik Buterin, have called for Terra to compensate smaller holders of UST and LUNA before its largest investors.

"There seems to be little hope for those hoping that some of the reserves could be used to compensate users of the stablecoin – since so little of it remains," Tom Robinson, chief scientist and co-founder at the blockchain analysis firm Elliptic, wrote in an email. "Of course we will wait to see whether LFG can provide proof to back up their statements."

Today’s newsletter was edited by Brad Keoun and produced by Parikshit Mishra and Stephen Alpher.


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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by; both groups 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, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Parikshit Mishra

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

Bradley Keoun

Bradley Keoun is the managing editor of CoinDesk's Tech & Protocols team. He owns less than $1,000 each of several cryptocurrencies.

Sam Kessler

Sam is CoinDesk's deputy managing editor for tech and protocols. He reports on decentralized technology, infrastructure and governance. He owns ETH and BTC.

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