It has been a week since the ecosystem crashed and the cryptocurrency market in general is trying to bottom out and find stability.
The crash of and LUNA has been one of the biggest events in recent cryptocurrency history, similar to the Mt. Gox crash in 2014. LUNA fell to almost zero and the algorithmic stablecoin UST lost its peg to the dollar.
This development was a major setback for investors, especially those who were storing their savings in UST, and also raised questions about other stablecoins. Investors withdrew around €6.6 billion from the main stablecoin, (USDT). As a result, the outstanding supply of Tether dropped by around 10% and USDT also briefly shed its dollar peg. However, USDT remains the third largest coin by market cap, after Bitcoin and . In theory, stablecoins like USDT and other similar competitors are meant to hold enough fiat currency in their reserves to allow users to exchange their stablecoin reserves for fiat currencies. These reserves are held in cash and cash equivalents, including treasury bills.
LUNA’s case was different as its UST held reserves in Bitcoin and other major cryptocurrencies.
Bitcoin could be finding its ground
Typically, after big drops, it takes time for the market to stabilize and for investors to digest the news and data. At the moment, the technical indicators are showing mixed signals, while the cryptocurrency markets move in sync with the traditional financial market, especially the major US stock indices. The traditional stock market is also moving lower, with all the macro factors contributing to increasing downward pressure.
Last week, Bitcoin closed with a somewhat bullish weekly candle, which can be interpreted as a bullish hammer formation, with the real body sitting in the 30% range of the full candle. This formation, combined with a weekly breakout failure pattern, may imply that a trend reversal is pending.
The daily chart of Bitcoin shows a trading range between €27,400 and €30,250, in the same zone as the support levels of the summer of 2021. A break above or below this range can show the direction of the next move. of the price.
Crypto market sentiment remains in extreme fear
The crash of UST and LUNA has probably represented a fundamental capitulation event, which has marked the reactions of selling and panic. Traders’ emotional bias is driven by fear and greed, currently pointing to extreme fear levels for the second week in a row. Last week, the cryptocurrency fear and greed index rose slightly and now stands at 13/100.
Historically, buying in regions of extreme fear has been more profitable than selling or shorting deep bears. However, the process of bottoming out after a big drop can take a long time to absorb all the negativity.
Major altcoins recover slowly
Ethereum and other major altcoins are showing signs of recovery, although the situation remains uncertain. ETH price saw a local bottom at €1,760. The first degree of upper resistance is found at the €2,300 level, while support on the downside is found at €1,760.
Although May was an unlucky month for Ethereum in terms of price, it turned out to be a good one when it came to mining. Following a steady rise throughout April, the Ethereum mining hashrate peaked at 1,126,674.2703 GH/s on May 13.
It has been one of the best performing crypto projects for the past 18 months, but it also took one of the biggest hits last week as almost all smart contract tokens crashed. The price of SOL fell by around 50% in just 7 days and found a local bottom at 40 euros.
Solana’s Total Value Locked (TVL) continued to fall during the third week of May due to bearish market trends that have seen interest in decentralized finance (DeFi) decline.
has managed to overcome the important support level of 0.32 euros. This jump comes after a drop to the €0.22 level, its lowest since January 2021. Indicators remain bearish, with IOTA trading below important MA lines.
bottomed out at 6.6 euros and broke through the resistance zone again. It is now testing the €9 level again, which has been acting as a support level since July 2021. AT indicators such as RSI and MACD remain in bearish territory.
it touched a long support trend line and is now trying to reverse its downtrend. The long wicks suggest that the buyers are aggressive at these levels, but the price is still trading well below the important moving averages.
Several indicators show that XRP is oversold, which means that it may be able to push in the direction of an uptrend in the short term. However, to validate that reversal, the price must move towards a formation of higher highs and a formation of higher lows.
The current selling pressure in the cryptocurrency market shows no signs of abating anytime soon, with the price of Bitcoin declining for seven consecutive weeks for the first time in history. This momentum continues to favor bearish investors.