Crypto Weekly: 20 – 26 June 2022
The crypto market downturn has had far-reaching implications, including the collapse of decentralized finance (DeFi) platforms, mass employee layoffs, as well as margin calls faced by companies that held significant amounts of Bitcoin in their portfolios.
Crypto lending platform Celsius Network temporarily suspended all withdrawals and transfers between accounts after suffering a liquidity crisis for stETH, an ETH derivative representing staked ETH on the Ethereum 2.0 beacon chain that can be swapped 1:1 for ETH. However, due to the crypto market downturn and a fluctuating stETH-ETH exchange rate, the stETH-ETH liquidity pool saw massive amounts of investors seeking to exchange their stETH for ETH, triggering a significant imbalance between the two assets and kicking off the start of Celsius’ liquidity problems. Additionally, the heavy market sell-off has raised concerns regarding whether Celsius will be forced to liquidate its assets if Bitcoin prices continue to drop, leading to speculation that Celsius could potentially go bankrupt if the situation does not improve.
Three Arrow Capital (3AC), a multi-billion-dollar crypto-focused hedge fund, is on the verge of insolvency following its failure to meet margin calls from lenders triggering significant liquidations on 3AC’s leveraged positions. Additionally 3AC’s $200 million investment in LUNA earlier this year has been made essentially worthless following the collapse of the Terra ecosystem, putting 3AC in an incredibly precarious position.
Coinbase has laid off about 18% of its workforce or about 1,100 people, citing the market downturn amidst cost-cutting measures as many prepare for a potential recession. Similarly, Blockfi and Crypto.com are cutting around 20% and 5% of their staff, respectively. In total, companies in the crypto space have laid off more than 1,500 people in the past two months.
Tron’s USDD stablecoin continues to deviate from its dollar peg, raising more red flags over algorithmic stablecoins, with perhaps the most notorious case being the UST-LUNA. South Korea’s largest crypto exchange Upbit has issued warnings to users regarding the possible risks of TRON and USDD’s de-pegging. Meanwhile, the Tron DAO Reserve is still continuously buying Bitcoin and TRX for its reserve.
US lawmakers and regulators say a new federal stablecoin law could be passed by the end of this year. Legislative and regulatory concerns regarding stablecoins are at an all-time high following the TerraUSD meltdown, leading to renewed cries amongst financial regulators to have greater regulatory clarity.
El Salvador’s Finance Minister Alejandro Zelaya revealed that the country’s bitcoin portfolio had lost over $40 million in value since 2021, representing about a 50% drop since it became legal tender in the Central American country. Despite the losses, forty million dollars does not even account for 0.5% of El Salvador’s national budget.
Michael Saylor continues to double down on his support for Bitcoin, with the MicroStrategy CEO tweeting “In #Bitcoin We Trust” despite rumors that the company has an unrealized loss of more than $1 billion from their total of 129,218 bitcoins held. Similarly, Tesla has reportedly lost over $500 million in value from its Bitcoin investment amidst the market downturn.
USDC issuer Circle Internet Financial is set to launch EUROC, a fully-backed Euro-pegged stablecoin that will begin trading 30 June. Meanwhile, USDC’s market cap continues to grow, reaching over $54 billion in market capitalization, gradually closing the gap between USDC and USDT, Tether’s us dollar stablecoin.
Elon Musk, Tesla, and Space X are being sued for $258 billion from crypto investors over allegations of illegal racketeering to inflate the price of Dogecoin, accusing Musk of running a “pyramid scheme” to support the meme coin.
Weekly Technical Analysis: 20 – 26 June 2022
Bitcoin (BTC) has broken past all key support levels and might come down to test the $17,000 support level in the short run. If this support level can remain intact, we might see a sell-off, and BTC may trend sideways due to the lowest ever monthly RSI which might stop the price from continuously plunging. However, if Bitcoin still cannot create new highs and start lifting its lows, there is a chance that Bitcoin will continue to fall with its first resistance level at $30,000.
ETH is officially in bear market territory and is at risk of testing the $800 support level in the short run. However, if the support can remain intact without prices making a new low, we might see an ETH recovery with a $2000 resistance level to confirm a rally. The overall trend will be in a better position if it can surpass this resistance level. If ETH falls below $800, investors are advised to cut their losses as there is a high possibility that prices will continue to plummet past that point.
SOL is up by +13.5% over the past week and has recovered from its low price at 880 THB which will act as SOL’s support level this week. If it can maintain its price above this level, we might see signs of a recovery with initial resistance set at 1,480 THB. The overall trend is still clearly bearish, and investors are advised to wait until the first resistance is breached.
FTM is up by +10.2% over the past week and will look to challenge an initial resistance level at 9 THB. If successful, FTM will look to test a more significant resistance level at 12 THB, which could trigger an uptrend in the short term. However, if prices fall below the 6.5 THB support level, investors are advised to cut their losses due to the possibility of another FTM or market slump.
Trading and Investment Considerations For The Week
Bitcoin fell below its major support level at $20,000, with the current downtrend strong enough to have prices test the $17,000 level and potentially as far as the $10,000 mark. Bitcoin has fallen over 85% from its all-time high at $69,000, a drop equivalent to the record set in 2018.
Despite having already undergone a massive correction from its peak, Bitcoin could still be facing another 50% decline if prices fall all the way to the $10,000 level. Long-term investors are advised to apply wise portfolio management strategies and allocate their total funds into three or more positions without going all-in on the market at once.
Short-term traders are advised to beware of the volatility in the market and how potential negative news from different platforms can both cause and be triggered by the market’s downtrend. Traders are advised to focus on short-term trading strategies and taking profit when they can until the market can recover.
Investors are advised to keep an eye on FED chair Jerome Powell’s biannual report on monetary policy to the US Senate from 22-23 June. Powell’s report is expected to touch on the economic outlook and could affect investor sentiment and market behavior. Powell’s testimony could be the most significant economic event before the release of June’s Consumer Price Index (CPI) figures, which is scheduled for 13 July 2022.
*Materials on Bitazza Weekly Newsletter are intended to be used and must be used for informational purposes only. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily represent those of Bitazza and its employees. The information contained herein is not intended to be a source of advice or financial analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice.
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