First Mover Americas: Bitcoin Struggles to Hold $30K Ahead of Fed Minutes

Good morning, and welcome to First Mover. I’m Lyllah Ledesma, here to take you through the latest in crypto markets, news and insights.

Bitcoin (BTC) was trading up on the day but struggled to remain above the $30,000 threshold. The world’s largest cryptocurrency by market capitalization has lost more than half of its value from its all-time high around $69,000 reached in November 2021.

BTC briefly hit $30,000 in the early trading hours on Wednesday but has since dropped to around $29,600. It is up 1.1% over the last 24 hours.

Ethereum (ETH) was down 0.6% on the day and is struggling to stay above $2,000.

Ethereum Classic (ETC), which has a market capitalization of $3.19 billion, was going against the market and trading 10% up on the day. Ethereum Classic is a blockchain that was created after a contentious hard fork of the Ethereum blockchain took place in 2016. It is like Ethereum in that it supports smart contracts and decentralized applications, known as dapps.

In traditional markets, Asian stocks inched higher while U.S. equity-index futures reversed earlier gains as investors awaited minutes from the Federal Reserve’s latest policy meeting. Those are scheduled for release on Wednesday at 2 p.m. ET (18:00 UTC).

As investors await the Fed minutes, the crypto market is seeing relatively muted trade.

Matthew Dibb, co-founder of Stack Funds, said that he does not foresee any overly optimistic outcome from the release given the language that has been adopted recently by the Fed.

For crypto, Dibb does not predict much impact. “Our expectation for crypto is generally a continuation in the current range or slight downside if macro leads,” said Dibb.

Marcus Sotiriou, analyst at the U.K.-based digital-asset broker GlobalBlock, said that the Fed’s minutes could spark a relief rally in the short-term for crypto.

“As the FOMC makes key decisions about interest rates and the growth of the United States money supply, these meeting minutes will be pivotal for bitcoin’s price in the short term,” said Sotiriou. FOMC stands for Federal Open Market Committee – the Fed's panel that sets monetary policy.

If the Fed hints dovishness for the first time in a long while by mentioning no 75 basis point hikes or a pause in tightening on return to neutral rates, Sotiriou said this would be bullish and could lead to a rally in the next one or two weeks for bitcoin.

On-chain metrics

Bitcoin options traders are more focused on hedging exposure than ever before, according to data from Arcane Research.

Options traders are hedging at large, proven by skews reaching new all-time highs across durations. The 25-delta skew shows the difference between the implied volatility for put and call options at the same maturity. A positive skew signals a higher demand for put options than call options, signaling that traders are leaning bearish.

“These skew levels are unprecedented in the bitcoin options market history, suggesting a very pessimistic outlook among options traders,” wrote Arcane Research in its weekly update.

The one month (25D) skew reached a 24-hour average all-time high on May 12 of 24%, surpassing May peaks from 2020 and 2021.

The six-month 25D skew also shows a strong demand for puts, sitting at 12.57% currently, according to data from Arcane Research. The longer-dated maturities have not reached the current high levels before. On June 1, 2021, the six-month skew peaked at 4.75%.

By Shaurya Malwa

A snapshot of the Terra blockchain is expected to take place later this week ahead of the launch of “Terra 2.0,” a so-called revival of the Terra ecosystem following the implosion of terraUSD (UST) earlier this month.

The revival plan is now moving forward after the conclusion Wednesday of a vote among network validators, with a 65% approval rate.

Investors who held over 10,000 LUNA before UST’s implosion will receive the new tokens periodically to prevent immediate selling. Over 30% of their tokens would be unlocked initially, and the remaining 70% would be released over two years. New tokens will be distributed after six months to such holders.

Wallets with more than 1 million LUNA or UST prior to UST’s depegging would have to wait more than a year before receiving any tokens, with a four-year vesting period thereafter, according to the revival plan.

A snapshot – meaning a recording of the state of a blockchain at a specific point in time – will allow Terra to send the newly issued LUNA tokens to holders of the old LUNA. This would, in theory, allow old holders to regain some of their lost investment value while incentivizing usage of the new blockchain.

The snapshot for the Terra 2.0 is expected on May 26. “Going by block times, the post snapshot block, 7,790,000, could happen as soon as May 26, 2022, 16:20:00 UTC,” Terra developers said in a post on Tuesday.

“The supply at genesis is considerably lower than anybody is anticipating, closer to 116.7M rising to 182M after 1 year,” they added, addressing community concerns about a highly inflated luna supply.

How the snapshot plan came about

In early May, UST lost its peg with the U.S. dollar and fell to as low as 7 cents in the weeks afterward, causing prices of its related luna (LUNA) tokens to drop 99.7% and outflows of over $28 billion from Terra-based decentralized finance (DeFi) apps.

This led to a loss of sentiment among LUNA investors and traders, apparently even sparking public outrage in Korea, where Terra had a huge community, and some crypto funds seeing billions of dollars in losses.

Terra’s oft-brash founder Do Kwon came up with a revival plan in the days afterward, proposing a “fork” of the blockchain and an “airdrop” to holders affected by the UST implosion.

The plan tries to make the community whole while reviving their trust in the Terra ecosystem.

“Fork” of a blockchain refers to the creation of a new blockchain with data from the old blockchain preceding that of the newer ones. Terra developers have, however, stated that "Terra 2.0" will be an entirely new project, meaning no data from the current chain will be carried on to the new one.

The revival plan, although voted to pass by Terra’s network validators, was pushed live even as results from a preliminary online poll on a hard fork plan found minimal backing among community members.

Some 92% of over 6,220 voters on a previously held online poll voted against the change, with the most popular responses calling for “no fork,” as reported.

LUNA prices are up over 6.2% in the past 24 hours.

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