Market participants feel uneasy and doom ahead of the World Economic Forum. Bitcoin ( BitcoinTC) begins a new week below $30,000 as the fight to save the market continues. The largest cryptocurrency continues to lose $30,000 support despite reaching its highest level since the Terra LUNA crashes last week.
What is in store for this week? This week, the World Economic Forum is shaping up to bring about major disruption from macro players such as the United States Federal Reserve.
Nevertheless, the internal pressure on the crypto markets remains as the consequences of LUNA’s fall continue to play out.
Cointelegraph looks at five potential BTC price movers for the next days.
Bulls suffer a record weekly loss
After the market’s seven-day upheaval, traders feel a sense of cautiousness this week.
Blockchain protocol Terra’s TerraUSD (UST), and TerraLUNA (LUNA) tokens collapsed. Their decline rippled across crypto markets and Bitcoin was no exception.
BTC/USD bounced to $31,000 after dropping to its realized price at just under $24,000. However, this strength is now limited as $30,000 proves to still be an insurmountable level to win the battle for good.
Although the picture is more encouraging than some altcoins, traders tend to steer clear of any strongly bullish price moves.
One of the key narratives that is gaining ground revolves around current levels, which form the basis for a relief bounce. This will eventually end in rejection and an attack on lower lows this week.
“Just like us bulls fought against the trend for the last few weeks, I think bears are about to deny any more upside,” IncomeSharks stated in part two of their recent posts on BTC/USD outlook.
It was that bearish-leaning people will “get too caught in their bias.”
Crypto Tony, a fellow trader, said that the pair must reclaim $31,000 and not $30,000 to continue higher, as the former marked the highs in the week’s range.
Zooming in, it is clear that the picture seems more precarious than on daily or hourly time frames.
Despite modest recovery, the weekly BTC/USD chart closed on May 15, with its seventh red candle. This is the first such event in history. Data from Cointelegraph Markets Pro, TradingView showed that the week ended at $31,300.
The Twitter account Nunya Bizniz, which was pondering whether the prolonged downside could last much longer — even beyond 2022, noted that Bitcoin’s historical highs have been well below their all-time highs due to block subsidy halvings.
It would be historical precedent that BTC/USD trades significantly below $69,000 at the time it halved in two years.
Davos is looming and DXY won’t stop.
Last week, the Fed had to deal with inflation, rate hikes, and geopolitical strife. These factors were ironically overshadowed by Terra almost immediately.
However, while no significant announcements are expected this week in the meantime, tensions remain.
The Russia-Ukraine conflict, inflation, and the measures taken to reduce it are still the main topics of central banks all over the globe. As the 2022 World Economic Forum begins on May 22, this will be a key topic.
This Forum will be held in El Salvador and will include the possibility of attendees making Bitcoin-related comments.
“Tomorrow, 32 central bankers and 12 financial authorities (44 nations) will meet in El Salvador for financial inclusion, digital economy and banking the unbanked. We will also discuss the Bitcoin rollout in our country,” President Nayib Buukele stated May 15.
The U.S. dollar is not willing to give up when it comes down to strength against major trading partners currencies.
Despite local consolidation phases, the U.S. dollar Index (DXY) remains in an uptrend that has denied bears a macro peak for months.
DXY reached 105 on May 9th, its highest level since Dec. 9, 2002.
Blockchain Backer, analyst, tweeted “At the time, the Euro’s 5-year lows are being tested vs. the U.S. dollar,” as part of a thread about the macro environment in relation to crypto.
“The Euro is a significant component of the U.S. Dollar Currency Index, (DXY) and has historically acted in an opposite direction to the DXY.”
DXY has historically pressed stocks and crypto markets. However, the former still show correction structures seen in bear markets. Blockchain Backer says.
“So, there are a lot of things going on here. Dow Jones drops below the support level of last week. DXY at 20-year highs. EURUSD is supported. Altcoin Market, Ethereum and similar correction structures as before. The thread said that no coins fly as if a reverse is in.”
Tether crawls back after 5% depegging
It doesn’t matter what the market is doing next week, the ghost of last weeks mayhem is still haunting it on Monday.
As data continues to trickle in on the effects of Terra’s UST/LUNA tokens’ collapse, it is still not clear what the company intends to do to address them.
While some facts are obvious, they have not been officially confirmed. For example, mass selling of Luna Foundation Guard’s (LFG), BTC reserves. Other rumors remain, notably mass bankruptcy of organizations exposed to LUNA or UST.
It is unclear what will happen next. Blockchain Backer points out that no one knows for certain if the sale is over.
“Last week, there was a devastating impact on LUNA/UST. “We don’t yet know all the details and who suffered collateral damage,” it stated.
“Were other treasuries also exposed to this?” Is LFG able to sell all of their Bitcoin reserves or are there still more? We don’t know.”
The industry’s largest stablecoin, by market capital, is the focus of attention. Tether (USDT), which saw its dollar peg slip last Wednesday, still doesn’t fully equal 1 USD at May 16, despite no sign of a repeat UST performance.
Blockchain Backer said that “When TerraUSD (UST) started to hit the fan, it started with a small slip and then spun out of control.”
Cointelegraph reported that Tether’s creators have publicly defended USDT’s ability to weather the storm due to its structure being different from UST or algorithmic stablecoins generally.
“Over the next few days, we will begin to know the extent of damage as more reports of significant losses or collapses emerge,” QCP Capital, a crypto trading firm, told Telegram channel subscribers in its most recent update on May 13.
“Despite the destruction, however, we are encouraged by the resilience that we have seen in certain segments of crypto.”
LUNA continues to witness uncontrolled volatilty. This makes it nearly impossible to chart at any timeframe and was traded at 0.00023 at Bitfinex as of May 16.
Analyst: Institutions are buying more
Are there people who are buying Bitcoin? Data shows that certain segments of the market have a clear “yes” answer.
In analysis published on May 16, Ki Young Ju (CEO of analytics platform CryptoQuant) highlighted institutional investors as a key phenomenon in Bitcoin between $25,000-$30,000,000.
Ki explained that although bids fell to $25,000 due to the LUNA scandal, overall bids remained constant for a year. These bids may be helping to mitigate the Terra sell-offs.
He noted that the BTC-USD Order Book Heatmap for Coinbase shows thick bid walls, despite the recent bear market in May 2021.
“I believe institutions tried to stack $BTC starting at $30k, but had to rebuild the bid wall at $25k because of the unexpected LFG sales.”
The accompanying chart illustrates how events unfolded on Coinbase, which Ki claims received most Terra-related funds.
Cointelegraph reported that the first Bitcoin spot price exchange traded fund (ETF), added a record amount of BTC intraday to its assets last week, as two Australian ETFs started operating.
Bitcoin addresses sentiment woes and growth
It’s not surprising that crypto market sentiment is still on the floor.
The Crypto Fear & Greed Index reflects nerves over stability in price, and is currently at 14/100.
The Index has reached historical bottom last week. However, the recovery has been noticeably less robust than the original drop, which saw the Index go from 27/100 up to 10/100 in just five days.
However, it is possible that things are not as grim behind the scenes as they seem.
Data Last week, Santiment, an on-chain monitoring company, showed that despite the chaos unique Bitcoin addresses are still growing.
It wrote in its Twitter comments, “The silver lining to the -33% drop over the past three weeks is that $BTC’s address activity has been steady.”
“The 16-month-high divergence between prices and addresses is a sign of a growing disconnect.”