The beginning of this week has been very harsh on investors in the crypto space. Massive liquidations occurred as stocks also started to plunge in very low areas, with the S&P 500 index losing 3.2% on Monday and the Nasdaq index losing 4.3%. The most important cryptocurrency in the world has lost about half of its value, dropping all the way to USD 29,730, while ETH reached the $ 2,200 level. This has been clearly driven by rising inflation and the crisis in traditional markets.
The markets are dealing with the announcement by the Fed which will gradually lead to a significant restriction of the liquidity present in the markets through further hikes in interest rates and the tightening of the Fed’s balance sheet.
The drop led to huge liquidations of leveraged bitcoin positions across all exchanges, with approximately $193 million liquidated between noon and midnight on Monday.
The price of Terra (LUNA) is still moving very sharply, with a collapse that touched $23 yesterday. In one of the most important developments in the market, Terra’s stablecoin (UST) lost its peg to the US dollar and dropped to below $0.67 before its recovery began. Because of this, the Terra team had to take action and lend its BTC reserves to a trading company that likely sold it to defend the UST peg. The UST is currently closer to the $0.90 area and will most likely continue recovering and get back to the $1 peg target.
The profits of companies such as Michael Saylor’s MicroStrategy have been dropping dramatically. In fact, according to Saylor’s latest announcement, the company’s average purchase price has been around $ 30,700. As of April 4, MicroStrategy held 129,218 BTC on its balance sheet—which is worth around $4 billion.
Because of the sale of cryptocurrencies on the last day, the so-called Crypto Fear and Greed Index currently indicates “extreme fear” in the markets with a value of 10 out of 100. This is a very important indicator used by crypto investors to measure the sentiment of the entire crypto market. Since it was created in 2018, the index only went below 10 another couple of times. These include the Covid-19 crash in March 2020 as well as the bear market capitulation in November 2018.
Current Market Outlook
Cathie Wood, tech investor and founder of ARK Investments, declared that a growing correlation between the crypto market and traditional assets can possibly indicate that the bottom of the bear market is very close. She remains very bullish on the crypto market and believes it still presents unprecedented opportunities for investors.
The situation is obviously linked to political and economic uncertainty on a global level. Uncertainty historically leads to a push towards safer forms of investment—including gold— moving away from more speculative and volatile securities. And although Bitcoin is often not considered a security by many members of the community, a large number of investors consider it as a risky and volatile asset and therefore treat it just like if it was a tech stock.
It’s also worth noting that sovereign states such as El Salvador and companies such as Townhall Media are buying the dip, while many institutional crypto holders such as Microstrategy don’t seem to even consider selling their assets. While this clearly looks like a bear market, a new bull run is still in the books for the next months since most on-chain metrics still seem pretty healthy
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Kevin Mudd, EU Regulated Fund Manager and KMG Capital Markets' CEO, created D-CORE to become the first provider of high-quality, institutional-level research in the crypto/blockchain market. He heads D-CORE's operations from Limassol, Cyprus.
Carlos Cano is D-CORE's Creative Lead and host of the Blockchain People podcast on D-CORE's platforms. He is a digital nomad and is responsible for all the creative materials you see from D-CORE. You can find him on Twitter.
