May 17, 2022

The latest moves in crypto markets, in context

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Good morning, and welcome to First Mover. I'm Brad Keoun, here to take you through the latest in crypto markets, news and insights. (Lyllah Ledesma is off this week.)

Price point: Bitcoin retakes $30,000 but few analysts are ready to call a market bottom.
Market Moves: Everyone celebrated the arrival of institutional investors to the bitcoin market, as their rising adoption helped send prices soaring. Now, with correlations to traditional markets at an all-time high, fingers are pointing over the market swoon, Helene Braun reports.
Feature: Terra's LUNA token gains, then slides, after blockchain founder Do Kwon proposes to create a separate chain or "fork" to make up for last week's implosion of the UST stablecoin, Shaurya Malwa reports.

Today's newsletter was produced by Parikshit Mishra. Please let us know what you think by replying to this email.

Price Point

Bitcoin (BTC) was back above $30,000 after losing the crucial foothold on Monday.

With crypto markets still looking wobbly after last week's crisis on the Terra blockchain, any signs of stabilization should be heartily welcomed by bitcoin bulls. Arcane Research, a Norwegian cryptocurrency analysis firm, wrote Monday that the market could get a jolt of fresh energy if bitcoin ends the week over $32,000.

For the time being, though, "there is little reason to argue that a prolonged rise will follow the current buying, as the fundamentals (tightening markets, slowing economy) remain in place," Alex Kuptsikevich, FxPro senior market analyst, wrote in emailed comments.

Ether (ETH) added 2.2% in the past 24 hours to trade above $2,000, with similar gains for Avalanche's AVAX, BNB Chain's BNB, and Dogecoin.

Polygon's MATIC (MATIC) gained 5.5% as Polygon Studios CEO Ryan Wyatt said the firm was working with Terra projects affected by last week's implosion and would onboard them to Polygon's broader DeFi ecosystem. Terra held billions of dollars in value on various DeFi applications, such as Anchor, before last week's fall.

In traditional markets, U.S. stock futures were higher ahead of Tuesday's exchange open in New York, along with gold. The yield on the 10-year U.S. Treasury bond was up 0.04 percentage point to 2.92%. The U.S. Dollar Index (DXY) was down 0.8%.

The uplift in global markets came as traders priced in expectations of relaxation of norms in Shanghai after weeks of strict lockdowns, leading to a bump in Chinese stocks. Policymakers in Beijing are taking steps to alleviate the economic slowdown, with various moves in the past week to boost its economy.

Traders could get fresh clues on U.S. central bankers' latest plans to tamp down fast-rising inflation from a 2 p.m. ET (18:00 UTC) appearance by Federal Reserve Chair Jerome Powell.

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

Market Moves

By Helene Braun

A key narrative in the crypto world in 2021 was the arrival of institutional investors to the space. Tesla (TSLA) bought $1.5 billion worth of bitcoin (BTC) and Wall Street banks like JPMorgan Chase (JPM) and Morgan Stanley (MS), as well as hedge funds, started allocating client assets to bitcoin that year.

Not only were these institutional investors a sign of growing mainstream acceptance, they also appeared to drive up prices. Crypto boomed with the sector's market capitalization growing 185% that year.

Now, as the crypto market's latest swoon wipes off $1.25 trillion from the industry's all-time high market capitalization reached late last year, the question has risen: What role is institutional money playing in the crash? Or to put it more bluntly, are institutional investors making things worse?

One thing we know: The crypto market is increasingly correlated to the stock market, and institutional investors appear to have heightened that correlation. And when the stock market goes down, it takes crypto with it.

"The influx of institutional interest in BTC, which started to pick up in early 2020 with public declarations of interest from stalwarts of traditional investing, such as Paul Tudor Jones and Renaissance Technologies, coincides with a sustained jump in the 60-day correlation between BTC and the S&P 500," according to an April 2022 report by Genesis Trading. (Genesis is a subsidiary of Digital Currency Group, which also owns CoinDesk.

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Crypto Prices

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers

Asset	Ticker	Returns	DACS Sector
Algorand	ALGO	+8.7%	Smart Contract Platform
Litecoin	LTC	+5.1%	Currency
Chainlink	LINK	+4.0%	Computing

Biggest Losers

Asset	Ticker	Returns	DACS Sector
Internet Computer	ICP	−2.3%	Computing
Cosmos	ATOM	−2.0%	Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Latest Headlines

A16z Addresses Downturn in Inaugural State of Crypto Report
The inaugural report discussed Web 3 trends and why Ethereum remains the dominant blockchain.
Citi Says Fallout From Terra Collapse Unlikely to Hit Wider Financial System
Recent weakness in bitcoin and equities looks contemporaneous and doesn't show any lag or lead effect, the bank's analysts said.
Coinbase Pares Back Hiring Plans Amid Weak Earnings, Poor Market Condition
The exchange previously planned to hire as many as 2,000 employees earlier this year.
Bitcoin Mining Appears to Have Survived Ban in China
From September 2021 to January this year, China's contribution to the bitcoin mining network was second only to that of the U.S.
BitMEX Starts Spot Exchange on Eve of Co-Founder Hayes' Sentencing
BitMEX co-founders Arthur Hayes and Ben Delo will be sentenced for violation of the Bank Secrecy Act on Friday.
Terra's LUNA Gains, Then Slides, After Do Kwon's Fork Proposal
Traders sold the tokens even as founder Do Kwon proposed a separate chain to make up for last week's implosion of UST.
Breaking Barriers to the Web 3 Creator Economy
The latest innovations in blockchain technology are enabling creators to earn more from their work and achieve an unprecedented level of autonomy.
How Not to Run a Cryptocurrency Exchange
At Japan's Liquid exchange, recently acquired by FTX, warnings were ignored, breaches unreported and employees berated and cursed at, insiders say.

FEATURE:

Terra's LUNA Gains, Then Slides, After Do Kwon's Fork Proposal

By Shaurya Malwa

Terra's LUNA shed nearly a quarter of its value in the past 24 hours after a proposed revival plan revealed by founder Do Kwon, data shows.

LUNA rose to as much as $0.00022 on Monday evening as plans to fork the current Terra blockchain went viral on social media. It then shed as much as 22% in early Asian hours to trade at just over $0.00017 at writing time. Some $2.1 billion worth of the tokens were traded in the past 24 hours alone.

The token is down more than 99% since April highs of nearly $120. The drop came as excess LUNA was put into circulation last week to prevent the collapse of terraUSD (UST), a Terra ecosystem stablecoin pegged to U.S. dollars, as reported.

Sentiment remains mixed for the proposal among the crypto community.

Some said they would support the new chain and anticipated the airdrop to prior holders. Others suggested the plan was unfair, as it could vastly benefit investors who purchased massive amounts of LUNA at a few pennies more than those who purchased the tokens when they were valued above $100. To combat this, however, Kwon proposed holding two snapshots – one prior to UST's collapse, and one after – and airdropping equivalent amounts of new tokens.

What to watch:

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.

Paul Brody, principal and global innovation leader, Ernst & Young
Andre Portilho, head of digital assets, BTG Pactual
Cory Klippsten, CEO, Swan Bitcoin
Ron Hammond, director of Government Relations

Consensus 2022, the must-attend crypto and blockchain experience of the year, is heading to Austin, Texas, from June 9-12. This is the only festival showcasing and celebrating all sides of the blockchain and crypto ecosystems and their wide-reaching effect on commerce, culture and communities. Register now for the lowest price.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.