LUNA’s collapse and bitcoin crash to $26 700. Key events of the week
The most important industry news and a detailed analysis of digital assets in the weekly review of Getblock Magazine
13.05.2022 - 08:15
The big news of the week was the Terra (LUNA) token, which fell from $80 to $0,000002, and the TerraUSD (UST) stablecoin, which lost its peg to the dollar and dropped to $0,16 (according to Binance on the morning of May 13).
The bitcoin exchange rate has fallen by 16,8% over the past seven days. The asset reached the highest values on May 7, when 1 BTC was trading at $36 146, the lowest values were recorded on May 12, at $26 700 per coin. As of May 13, 11:10 Moscow time, the bitcoin exchange rate is $30 277 (according to Binance).
The total capitalization of the crypto market fell from $1,67 trillion to $1,31 trillion over the week, with bitcoin dominating at 44,4%. Ethereum’s share is 19,4%.
LUNA and UST’s fall
On May 8, the rate of the algorithmic stablecoin UST lost its peg to the dollar. The Terra protocol uses the native token LUNA to secure UST, so their rates are closely linked. Initially,
Terraform Labs CEO Do Kwon explained that the drop in assets’ value was due to removing 150 million UST from the Curve Finance DeFi protocol in preparation to deploy to the 4pool liquidity pool.
The fall in rates continued in the days that followed, despite attempts to save the UST’s peg to the US dollar. On May 13, the Terra blockchain temporarily suspended operations to develop a new recovery plan. Binance halted deposits and withdrawals within the network on Thursday night. The exchange also delisted all trading pairs with LUNA except LUNA/BUSD. At the same time, Terra’s native token issuance reached 7 trillion.
On the evening of May 12, the Terra blockchain was reloaded. UST stablecoin never managed to regain its peg to the dollar, as of May 13, 2022, 10:30 Moscow time, it is trading at $0,11 (according to Binance). Meanwhile, the price of LUNA has collapsed to near zero at $0,000001.
NFT integration on Instagram
Social network Instagram, owned by Meta (recognized as extremist and banned within the Russian Federation), would add support forNFTs based on Ethereum, Polygon, Solana, and Flow blockchains. Large crypto wallets such as MetaMask would be used to tie non-fungible tokens to the social network. Instagram would not charge for posting NFTs.
Several collectors from the US would be participating in the test launch. It was not yet known if the social network would support all four blockchains immediately after launch. Meta CEO Mark Zuckerberg announced the integration of NFTs into Instagram back in March 2022 but never gave an exact timeline for the project.
Global regulation of cryptocurrencies
A single crypto regulatory body could be created in 2023. Ashley Alder, Chair of the International Organization of Securities Commissions (IOSCO) said that over the next year, global market regulators would create a joint body to effectively coordinate the market and agree on rules for the control of the digital assets sector.
According to him, the digital currency boom is one of the three main areas that authorities are now focusing on, along with COVID-19 and climate change. In addition, Alder called cybersecurity and a lack of transparency in the cryptocurrency sector key risks that regulators are lagging behind on.
New predictions on the BTC rate
Renowned trader and analyst Peter Brandt predicted a rebound in the bitcoin price after reaching the $27 000 mark. A surge in trading volumes can be seen on the BTC chart, which indicates capitulation. This process could mean the cessation of further price declines, according to Brandt.
The head of the brokerage firm Euro Pacific Capital Inc. Peter Schiff suggested that the price of bitcoin could fall below $10 000 if the rate of the first cryptocurrency continued to decline past the $30 000 mark. The US stockbroker urged the owners of the asset not to panic and not to make rash decisions. Schiff himself considers the best tactic to sell assets in order to then buy them back when the value falls.
Another prediction this week was made by crypto billionaire and chairman of the Bitcoin Foundation Brock Pierce. He believes that bitcoin can fall to zero or reach $1 million. Pierce warned investors against going all-in on the first cryptocurrency and urged them to diversify risks. According to the entrepreneur, the cryptocurrency landscape is now reminiscent of the 1999 tech bubble, when internet startups were culled. He explained that after the dot-com crash, companies such as eBay and Amazon formed, and even more businesses went bust. In Pierce’s view, this could happen in the crypto market as well. However, he noted that this does not mean that cryptocurrencies are unrealistic. Pierce added that they could play an important role in the collective future.
Trader and crypto analyst Tone Vays said that bitcoin would continue to fall over the next few months and may hit the $23 000 mark. Referring to the charts, Vays says that BTC looks “absolutely terrible” as it is giving a lot of bear market signals. Vays stressed that he is waiting for the right time to buy the first cryptocurrency. The trader also added that bitcoin may take months before it can hit the bottom of the bear market.
New requirements for election candidates
Russian President Vladimir Putin signed a decree that expands the list of verifiable information on foreign properties, expenses, securities, and shares of candidates for elections at different levels. Data on cryptocurrency and digital assets are now also subject to verification for authenticity. The decree came into force from the moment of its signing on May 9, 2022.
The document specifies that the request for verification of information received from candidates will now be sent not only to credit institutions, tax authorities, and banking structures but also to “information system operators in which digital financial assets are issued.” Candidates will be required to provide documents confirming the transactions: the information on the identification number, the date of the transaction, and the statement of the transaction, if available under applicable law.
MicroStrategy refused to sell bitcoins
MicroStrategy has no plans to sell bitcoins from its cryptocurrency reserves to secure previously taken loans. This was reported by the company’s head Michael Saylor. According to Saylor, the company has enough assets to secure loans.
MicroStrategy can pledge 115 109 bitcoins (about $3,49 billion at the exchange rate on May 13) to secure a $205 million term loan. This amount will be sufficient until the bitcoin price falls below $3562. If the price falls even lower, the company could post another collateral, Michael Saylor stressed.
Restrictions on the issuance of stablecoins
The European Commission is considering imposing tight restrictions on the use of stablecoins instead of fiat currencies. European officials plan to ban stablecoins if they become too popular.
Regulators may be given the power to require issuers to stop issuing new coins if their volume exceeds 200 million EUR and 1 million transactions per day. The issuance may be allowed again when the figures fall below this threshold.
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