Market Wrap: Cryptos and Stocks Fall, Luna Foundation Guard Accumulates Bitcoin

BTC declined by as much as 10% on Thursday, its largest price drop in two months.

May 5, 2022 at 8:30 p.m. UTC
Updated May 5, 2022 at 8:48 p.m. UTC

Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

Angelique is a market contributor at CoinDesk.

Sellers returned in full force on Thursday, sending both stocks and cryptos lower. The risk-off tone among market participants has been a dominant theme this year despite short-term price swings.

Bitcoin (BTC), the world's largest crypto by market cap, dropped by as much as 10%, reversing Wednesday's rise toward $40,000. The decline Thursday was the largest price drop in two months.

Meanwhile, alternative cryptos (altcoins) such as Solana's SOL token and Avalanche's AVAX token saw similar declines of about 10% over the past 24 hours. Popular meme coins such as Dogecoin's DOGE and Shiba Inu's SHIB declined by 5% and 7%, respectively.

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Bitcoin's selling volume isn't as extreme relative to previous price downturns. That suggests further downside is likely before sellers capitulate. Technical indicators point to further downside toward the $30,000-$32,000 support zone as momentum weakens.

And in the futures market, a large amount of open interest was added to the market during Wednesday's rally. During Thursday's sell-off, almost all of that open interest was closed out, according to Glassnode, a crypto data provider.

Latest prices

Bitcoin (BTC): $36,260, −8.86%

Ether (ETH): $2,726, −7.60%

S&P 500 daily close: $4,148, −3.55%

Gold: $1,880 per troy ounce, +0.69%

Ten-year Treasury yield daily close: 3.07%


Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

The chart below shows the spike in long BTC liquidations over the past 24 hours, which reached the highest level since April 10.

Liquidations occur when an exchange forcefully closes a trader’s leveraged position as a safety mechanism due to a partial or total loss of the trader’s initial margin. That happens primarily in futures trading, which only tracks asset prices, as opposed to spot trading, where traders own the actual assets.

Selling intensified later during the New York trading day, which pushed bitcoin below $36,000. That triggered an uptick in long liquidations. From a technical perspective, the sharp price drop rejected support at $37,500, which was the lower end of a three-month price range.

Over the past month, option traders were actively hedging against further price drops and purchasing front-month volatility contracts. That contributed to a bearish tone among market participants, which preceded the current sell-off.

CoinDesk - Unknown

Bitcoin total liquidations (Coinglass)

Supply meets demand?

On the flip side, it appears that selling pressure was met with renewed buying interest from the Luna Foundation Guard (LFG).

On Thursday, the foundation reported that it has acquired $1.5 billion in bitcoin to bolster the reserves of its Terra (LUNA) stablecoin. The purchase was conducted using over-the-counter swaps, which included one billion TerraUSD (UST) for $1 billion worth of BTC. Afterward, the foundation purchased an additional $500 million worth of BTC.

The newly acquired BTC brings the LFG’s total holdings to about 80,394 bitcoins, worth just shy of $3 billion. LFG aims to have accumulated a total of $10 billion in stablecoin reserves before the end of the third quarter.

"From the flows side, we are also watching progress on the Mt. Gox settlement to see when bitcoin payments totaling about $7 billion-$8 billion could potentially arrive in the market, which could be as early as the second half of 2022 or delayed until 2023," David Duong, head of institutional research at Coinbase, wrote in a report earlier this week.

"This could potentially be offset by purchases of bitcoin (or other tokens) to shore up stablecoin reserves, comparable to the LFG flows we saw in March and early April," Duong wrote.

Theoretically, persistent buying from LFG and others could absorb recent selling among traders.

Altcoin roundup

  • Dogecoin, Shiba Inu underperform broader crypto market despite fundamental growth: The tokens of dogecoin and shiba inu fell by an average of 1.6% in the past 24 hours. The relative underperformance came even as both ecosystems saw fundamental growth in their underlying communities. DOGE was used to fund the purchase of a controlling stake in BIG3 league basketball team Aliens, and Shiba Inu developers started allowing community members to use SHIB for minting virtual land on Shiba Inu’s new metaverse. Read more here.
  • Solana Pay adds customized transaction requests for merchants: Solana Pay will facilitate transaction requests between merchants and users with a feature that went live on the platform this week, according to a post by Solana developers. Developers added the transaction request feature to allow merchants to provide customized transaction links to users, such as unique non-fungible tokens (NFTs) or virtual gifts. Read more here.

Relevant insight

Other markets

Most digital assets in the CoinDesk 20 ended the day lower.

Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector
Algorand ALGO −11.9% Smart Contract Platform
Cosmos ATOM −11.8% Smart Contract Platform
Filecoin FIL −11.5% Computing

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

CoinDesk - Unknown

Angelique is a market contributor at CoinDesk.

CoinDesk - Unknown

Damanick is a crypto market analyst at CoinDesk where he writes the daily Market Wrap and provides technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also an equity/fixed income portfolio manager and does not invest in digital assets.

CoinDesk - Unknown

Angelique is a market contributor at CoinDesk.

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