First Mover Americas: Bitcoin Retakes $30K as 'Institutional Adoption' Makes Crypto More Like Stocks
The latest moves in crypto markets in context for May 17, 2022.
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.)
- Price point: Bitcoin retakes $30,000, but few analysts are ready to call a market bottom.
- Market Moves: Everyone celebrated the arrival of institutional investors to the bitcoin market, as their rising adoption helped send prices soaring. Now, with correlations to traditional markets at an all-time high, fingers are pointing over the market swoon, Helene Braun reports.
- Feature: Terra’s LUNA token gains and then slides, after blockchain founder Do Kwon proposes to create a separate chain or "fork" to make up for last week’s implosion of the UST stablecoin, Shaurya Malwa reports.
Bitcoin (BTC) was recently back above $30,000 after losing the crucial foothold on Monday.
With crypto markets still looking wobbly after last week's crisis on the Terra blockchain, any signs of stabilization should be heartily welcomed by bitcoin bulls. Arcane Research, a Norwegian cryptocurrency analysis firm, wrote Monday that the market could get a jolt of fresh energy if bitcoin ends the week over $32,000.
For the time being, though, "there is little reason to argue that a prolonged rise will follow the current buying, as the fundamentals (tightening markets, slowing economy) remain in place," Alex Kuptsikevich, FxPro senior market analyst, wrote in emailed comments.
Polygon’s MATIC (MATIC) gained 5.5% as Polygon Studios CEO Ryan Wyatt said the firm was working with Terra projects affected by last week’s implosion and would connect them to Polygon’s broader DeFi (decentralized finance) network. Terra held billions of dollars in value on various DeFi applications, such as Anchor, before last week’s fall.
In traditional markets, U.S. stock futures were higher ahead of Tuesday's exchange open in New York, along with gold. The yield on the 10-year U.S. Treasury note was up 0.04 percentage point to 2.92%. The U.S. dollar index (DXY) was down 0.8%.
The uplift in global markets came as traders priced in expectations of relaxation of rules in Shanghai after weeks of strict lockdowns, leading to a bump in Chinese stocks. Policymakers in Beijing are taking steps to alleviate the economic slowdown, with various moves in the past week.
Traders could get fresh clues on U.S. central bankers' latest plans to tamp down fast-rising inflation from a 2 p.m. ET (18:00 UTC) appearance by Federal Reserve Chairman Jerome Powell.
By Helene Braun
A key narrative in the crypto world in 2021 was the arrival of institutional investors to the market. Tesla (TSLA) bought $1.5 billion worth of bitcoin and Wall Street banks like JPMorgan Chase (JPM) and Morgan Stanley (MS), as well as hedge funds, started to allocate clients' assets to bitcoin.
That was a sign of growing mainstream acceptance, and it appeared to drive up prices. Crypto boomed with the sector’s market capitalization growing 185% last year.
Now, as the crypto market's latest swoon wipes off $1.25 trillion from the industry's all-time high market capitalization reached late last year, the question is, what role is institutional money playing in the crash? Or to put it more bluntly, are institutional investors making things worse?
One thing we know: The crypto market is increasingly correlated to the stock market, and institutional investors appear to have heightened that correlation. And when the stock market goes down, it takes crypto with it.
“The influx of institutional interest in BTC, which started to pick up in early 2020 with public declarations of interest from stalwarts of traditional investing, such as Paul Tudor Jones and Renaissance Technologies, coincides with a sustained jump in the 60-day correlation between BTC and the S&P 500,” a report in April by Genesis Trading stated. (Genesis is a subsidiary of Digital Currency Group, which also owns CoinDesk.)
- A16z Addresses Downturn in Inaugural State of Crypto Report The inaugural report discussed Web 3 trends and why Ethereum remains the dominant blockchain.
- Citi Says Fallout From Terra Collapse Unlikely to Hit Wider Financial System Recent weakness in bitcoin and equities looks contemporaneous and doesn’t show any lag or lead effect, the bank’s analysts said.
- Coinbase Pares Back Hiring Plans Amid Weak Earnings, Poor Market Condition The exchange previously planned to hire as many as 2,000 employees earlier this year.
- Bitcoin Mining Appears to Have Survived Ban in China From September to January, China's contribution to the bitcoin mining network was second only to that of the U.S.
- BitMEX Starts Spot Exchange on Eve of Co-Founder Hayes' Sentencing BitMEX co-founders Arthur Hayes will be sentenced for violation of the Bank Secrecy Act on Friday.
- Terra’s LUNA Gains, Then Slides, After Do Kwon's Fork Proposal Traders sold the tokens even as founder Do Kwon proposed a separate chain to make up for last week’s implosion of UST.
- Breaking Barriers to the Web 3 Creator Economy The latest innovations in blockchain technology are enabling creators to earn more from their work and achieve an unprecedented level of autonomy.
- How Not to Run a Cryptocurrency Exchange At Japan's Liquid exchange, which was recently acquired by FTX, warnings were ignored, breaches unreported and employees berated and cursed at, insiders say.
Terra’s LUNA Gains, Then Slides, After Do Kwon's Fork Proposal
By Shaurya Malwa
Terra’s LUNA shed nearly a quarter of its value in the past 24 hours after a proposed revival plan revealed by Kwon, the founder, data shows.
LUNA rose to as much as $0.00022 on Monday evening as plans to fork the current Terra blockchain went viral on social media. It then shed as much as 22% in early Asian hours to trade at just over $0.00017 at writing time. Some $2.1 billion worth of the tokens were traded in the past 24 hours alone.
The token is down more than 99% since its high in April of nearly $120. The drop came as excess LUNA was put into circulation last week to prevent the collapse of terraUSD (UST), a Terra ecosystem stablecoin pegged to U.S. dollars, as reported.
Sentiment remains mixed for the proposal among the crypto community.
Some said they would support the new chain and anticipated the airdrop to prior holders. Others suggested the plan was unfair, as it could vastly benefit investors who purchased massive amounts of LUNA at a few pennies more than those who purchased the tokens when they were valued above $100. To combat this, however, Kwon proposed holding two snapshots – one prior to UST’s collapse and one after – and airdropping equivalent amounts of new tokens.
Today’s newsletter was edited by Brad Keoun and produced by Parikshit Mishra and Stephen Alpher.
CORRECT (May 18, 3:55 UTC): Removes reference to Ben Delo in Latest Headlines section. An earlier version of this story said Delo would also be sentenced on Friday.
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