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Bitcoin fell below the $26,000 level since December 2020. (Photo credit should read CFOTO/Future Publishing via Getty Images)

CFOTO | Future Publishing via Getty Images

Investors have been eager to find out what happened to the $3 billion in bitcoin bought up by crypto firm Terra to back its failed stablecoin. Now, they've got their answer.

Luna Foundation Guard, a fund set up by Terra creator Do Kwon, said Monday it spent almost all of the bitcoin in its reserve last week in a futile attempt to save terraUSD or UST, for short.

The foundation had accumulated a total of more than 80,000 bitcoins, which was worth nearly $3 billion last week, as well as other tokens including BNB, tether, USDC and avalanche. Kwon had promised to use the bitcoin in the event of a dramatic fall in the value of UST.

In a series of tweets, Luna Foundation Guard said it transferred 52,189 bitcoins to "trade with a counterparty" as UST fell below its intended $1 peg. A further 33,206 bitcoins were sold by Terra directly in a last-ditch effort to defend the peg, the foundation said.

As of Monday, Luna Foundation Guard had just 313 bitcoins left in its reserve, worth approximately $9.3 million. The firm said it would use the remainder of its $85 million in crypto assets including some BNB and avalanche to "compensate remaining users" of UST.

"We are still debating through various distribution methods, updates to follow soon," Luna Foundation Guard said.

UST is what's known as an "algorithmic" stablecoin. Unlike tether and USDC, which hold fiat assets in a reserve to back their tokens, UST relied on a complex set of code, coupled with a floating token called luna, to balance supply and demand and stabilize the price.

When UST began to drop below $1 last week, luna also started to sell off, resulting in a vicious cycle that caused UST to plunge to less than 30 cents while luna became worthless. UST is now worth just 9 cents, according to CoinGecko data.

"The big problem when you're dealing with a partially collateralized stablecoin like UST is that your hard collateral bitcoin, in this case is going to be considerably more valuable to [investors] than your governance token," or luna, said Frances Coppola, an independent economist.

Blockchain analytics firm Elliptic estimates holders of UST and luna have lost a total of $42 billion over the past week. Analysis from the company shows that 52,189 bitcoins were moved to a single account at crypto exchange Gemini, while a further 28,205 bitcoins were transferred to Binance. Tom Robinson, chief scientist at Elliptic, said it was "not possible" to trace the movement of funds beyond these wallets.

The debacle rippled through crypto markets, wiping out more than $200 billion of wealth in a single day. Bitcoin on Thursday briefly fell below $26,000, its lowest level since December 2020. The world's biggest cryptocurrency was last trading at $29,526.75, down 1.4% in the last 24 hours.

"There's not a whole lot of outstanding sell pressure," said Dustin Teander, analyst at crypto research firm Messari.

"In a sense, the market is going to take that as kind of bullish."

See the article here:
$3 billion in bitcoin was sold in a last-ditch attempt to save UST stablecoin from collapse - CNBC

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Listen To The Episode Here:

In this episode of the Fed Watch podcast, Christian Keroles and I, along with the livestream crew, discuss macro developments relevant to bitcoin. Topics include the recent 50 bps rate hike from the Fed, a consumer price index (CPI) preview the episode was recorded live on Tuesday, before the CPI data was released and a discussion on why owners equivalent rent is often misunderstood. We wrap up with an epic discussion of the bitcoin price.

This could be a pivotal episode in the history of Fed Watch, because Im on the record saying that bitcoin is in the neighborhood of the bottom. This is in stark contrast to the mainstream uber-bearishness in the market right now. In this episode, I rely heavily on charts that didnt always line up during the video. Those charts are provided below with a basic explanation. You can see the whole slide deck that I used here.

Fed Watch is a podcast for people interested in central bank current events and how Bitcoin will integrate or replace aspects of the traditional financial system. To understand how bitcoin will become global money, we must first understand whats happening now.

On this first chart, I point to the Feds last two rate hikes on the S&P 500 chart. I wrote in a blog post this week, What I'm trying to show is that the rate hikes themselves are not the Federal Reserves primary tool. Talking about hiking rates is the primary tool, along with fostering the belief in the magic of the Fed. Remove the arrows and try to guess where the announcements were.

Same goes for the next chart: gold.

Lastly, for this section, we looked at the bitcoin chart with quantitative easing (QE) and quantitative tightening (QT) plotted. As you can see, in the era with No QE, from 2015 to 2019, bitcoin experienced a 6,000% bull market. This is almost the exact opposite of what one would expect. To summarize this section, Fed policy has little to do with major swings in the market. Swings come from the unknowable complex ebbs and flows of the market. The Federal Reserve only tries to smooth the edges.

Its hard to write a good summary of this part of the podcast, because we were live one day prior to the data dropping. In the podcast, I cover Eurozone CPI going slightly higher, to 7.5% in April year-over-year (YoY), with a month-over-month rate of change dropping from a staggering 2.5% in March to 0.6% in April. That is the story most people are missing on CPI: month-to-month changes rapidly slowed in April. I also covered CPI forecasts for the U.S. on the podcast, but now, we have hard data for April. U.S. headline CPI dropped from 8.5% in March to 8.3% in April. Month-to-month change fell from 1.2% in March to 0.3% in April. Again, a big decline in the rate of CPI increase. CPI can be very confusing when looking at YoY figures.

It looks like inflation in April was measured at 8.3%, when in fact, it was measured at only 0.3%.

Year-over-year CPI, month-over-month CPI (source)

Next topic we cover in the podcast is rent. I very often hear misunderstandings of the CPI measure on shelter and specifically owners equivalent rent (OER). For starters, its very hard to measure the impact of increases to housing costs on consumers in general. Most people do not move very often. We have 15- or 30-year fixed-rate mortgages that are not affected at all by current home prices. Even rental leases are not renewed every month. Contracts typically last a year, sometimes more. Therefore, if a few people pay higher rents in a certain month, that does not affect the average persons shelter expenses or the average landlords revenue.

Taking current market prices for rentals or homes is a dishonest way to estimate the average cost of housing, yet not doing so is the most often-quoted critique of the CPI. Caveat: Im not saying CPI measures inflation (money printing); it measures an index of prices to maintain your standard of living. Of course, there are many layers of subjectivity in this statistic. OER more accurately estimates changes in housing costs for the average American, smooths out volatility and separates pure shelter costs from investment value.

The rest of the episode is talking about the current bitcoin price action. I start my bullish rant by showing the hash rate chart and talking about why it is a lagging and confirming indicator. With the hash rate at all-time highs and consistently increasing, this suggests that bitcoin is fairly valued at its current level.

Bitcoin hash rate (source)

The history of bitcoin drawdowns (source)

Recent years have seen shorter, smaller rallies and shorter, smaller drawdowns. This chart suggests that 50% drawdowns are the new normal, instead of 85%.

Now, we get into some technical analysis. I concentrate on the Relative Strength Index (RSI) because it is very basic and a fundamental building block of many other indicators. Monthly RSI is at levels that typically signal cycle bottoms. Currently, the monthly metric shows that bitcoin is more oversold than at the bottom of the corona crash in 2020. Weekly RSI is equally as oversold. It is as low as the bottom of the corona crash in 2020, and before that, the bottom of the bear market in 2018.

The Fear and Greed index is also extremely low. This measure is showing Extreme Fear that typically registers at relative bottoms and at 10, ties for the lowest rating since the COVID-19 crash in 2020.

In summary, my contrarian (bullish) argument is:

That does it for this week. Thanks to the readers and listeners. If you enjoy this content please subscribe, review and share!

This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

See original here:
Market Mayhem and Calling the Bitcoin Price Bottom - Bitcoin Magazine

matejmo/iStock via Getty Images

Bitcoin (BTC-USD) has been bleeding for months due to tight liquidity conditions and targeted selling of high beta technology stocks. Low interest rates since the global financial crisis in 2008 have led markets to reach extreme valuations. Now, the decade-long bubble has popped, and assets are moving back to reality.

For most of Bitcoin's existence, it has benefited from low interest rates. With rates now rising, Bitcoin's price is suffering from the resulting uncertainty. In the near term, Bitcoin's Wave 3 Elliott extension is signaling a crash to $21k. In the long term, Bitcoin's Price Cycle outlook implies an 80% crash to $14k.

Bitcoin All-Time Chart (TradingView 5-11-22)

At BitFreedom Research, we believe the activities of the past 2.5 years will be remembered as the second dot-com bubble. The bubble popped in November 2021 when Bitcoin reached $68,990. Going forward, persistent sell pressure should kill any elements of the cryptocurrency market that do not provide tangible value.

While the underlying internet technologies that powered the turn of the millennium dot-com bubble were solid, an overabundance of investments into the space caused an eventual crash. This same process has afflicted the cryptocurrency market, and the crash is occurring right now:

LUNA, First Collapse Of The Crypto Crash (TradingView 5-11-22)

By following the same rules that dictated the dot-com crash, we can infer there will emerge oligopolistic winners that grow to dominate each Web 3 sector. According to our own analysis, the following cryptocurrencies are the most likely to survive and thrive long into the future:

If we believe these projects will succeed, then it follows that there will a be a point of maximum opportunity (a bottom) at some point during the present bear market. To find potential bottoms, we are using Elliott Wave theory combined with Bitcoin's Price Cycle theory.

Bitcoin Elliott Waves (TradingView)

Looking at Bitcoin's daily chart, the asset is currently moving in Wave 3 (the most powerful wave) of its long-term corrective phase. Wave 3 typically extends 1.618 the length of Wave 1. When charted, this Fibonacci extension implies Bitcoin will crash to $21k.

With Bitcoin in Wave 3, this implies a deeper move into Wave 5. To analyze how low a final Wave 5 can push Bitcoin, we are studying data from the asset's previous 2 price cycles.

After each parabolic run-up, Bitcoin has decreased from peak to trough by 80% approximately 1 year later. According to this movement, Bitcoin should reach $14k between October-November 2022.

Bitcoin Price Cycle Analysis (TradingView)

A major difference between the current crypto bubble and the previous dot-com bubble, is that the speed of the internet should make crypto's drawdown and recovery occur much faster. Due to this, we expect the entire cryptocurrency crash and bear market to conclude near the end of 2022. In accordance with how bubbles typically pop, a dip below Bitcoin's baseline growth trend (identifiable through the 200-week simple moving average) can take Bitcoin as low as $14k.

From a conceptual perspective, Bitcoin is currently in the Fear/Capitulation zone of the 'Stages in a bubble' diagram. Since Bitcoin's previous bull run was so long and unhinged, toxic aspects of the market now must die before everything can heal.

Stages In A Bubble (Hofstra University)

The following bad actors represent Greed, Delusion, and New Paradigm practices that are typical of asset bubble tops. We expect each of these enterprises to collapse in the coming months:

Going forward, each of these enterprises should die as Bitcoin returns to its baseline growth rate (the 200-week moving average).

Read more here:
Bitcoin: The Return To Reality - Seeking Alpha

Biden promises action on inflation concerns

President Biden is facing huge kickback in the polls as a result of high inflation, hurting his party politically ahead of this year's midterm elections.Biden has tasked the Federal Reservewith handling inflationand it is being criticisedfor moving too late to raise interest rates in an attempt to cool the economy.

Is Biden likely to blame the Fed for the poor inflation response? Unlikely - it was he who nominated Chairman Jerome Powell to a second term, the Senate confirmed him on Thursday, and it could seem politically weak to attempt to shift the blame.

Instead, Biden is focusing on measures that can cool the economic growth without tipping the country back into recession.

A White House statement on inflation reads: "Inflation is too high and is putting a strain on working families. The Presidents top economic priority is tackling inflation and reducing costs for American families so we can sustain this historic economic recovery in a way that benefits all Americans."

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USA finance and payments live updates: Bitcoin drops, $400 monthly check car owners, Child Tax Credit 2022, S. - AS USA

Bloomberg senior commodity strategist Mike McGlone has recently opined that Bitcoin BTC/USD and Ethereum ETH/USD will lead to the mostcrypto gains after the recent price dip.

In an interview, McGlone said that the Federal Reserves interest rate hikes are more detrimental to the U.S. stock market long-term than proven digital assets like BTC and ETH.

Also Read:Bitcoin Advocate Jack Dorsey Believes BTC Price Will Again Rise: Here's Why

Overall, the volatility of these nascent crypto assets, most notably Bitcoin, has declined versus the stock market. Thats what happened with Amazon when it first came out. Its volatility in 2009 was the same as with Bitcoin right now, he said.

Investors are looking forward to the future do you want to miss out on this revolution?, McGlone questioned and said, Thats what I see happening. There are a few selling offers in the stock market and bids below in things like Bitcoin and Ethereum.

McGlone believes that despite BTC recently dipping below the $30,000 level, its not the only asset class in decline.

Also Read:Bitcoin Bloodbath Getting Worse: Crypto Experts Say Mid-$20,000 Range May Be Next

Its going down with the ebbing tide with all risk assets. What happened to the S&P 500 this week? It finally got below 4,000 for a while, he said.

At the time of writing, Bitcoin was trading at $30,074, down almost 13% down in the last seven days.

Ethereum was trading at $2,078.29, losing over18% in the last seven days.

For the first time in about two years, both Bitcoin and the S&P 500 came back to the 100-week moving averages. The asset that went up the most over the past five-ten years will return as the Fed hammers the punch bowl Its more likely to come out ahead, McGlone added.

Excerpt from:
This Analyst Believes Bitcoin and Ethereum Will Outperform Stocks: Here's Why - Benzinga - Benzinga