Bitcoin’s loses 17% in a single weekend with Luna’s UST sharing the blame
Between May 6 and 8, Bitcoin’s value dipped by a staggering 17%.
- Experts believe Bitcoin could potentially slide down to $29,000 in the near term.
- Terra, owner of one of the largest Bitcoin wallets in the world, recently saw its stablecoin offering UST witnessing liquidations worth approximately $290 million.
- Technical data suggests that Bitcoin’s fundamentals are currently weaker than what they were following the March 2020 crash.
Bitcoin (BTC) continues to be ravaged by bearish pressure. Over the last 72 hours, the premier digital currency has dipped from approximately $36,000 to as low as $30,200. That said, Bitcoin has since made a minor comeback, currently trading at $31,220.
Even though Bitcoin found some respite from the ongoing volatility around the $35,000 range on May 8, the stability was short-lived because the cryptocurrency soon faced a series of liquidations. On-chain data suggests that since then, around $80 million worth of Bitcoin and Ethereum has been liquidated by investors across the globe.
In terms of where the market may be headed in the near term, analysts believe that more dips may be incoming. Bitcoin could nosedive as low as $29,000 before forging any sort of trend reversal.
Is Terra’s stablecoin to blame for all the carnage?
An interesting aspect of Bitcoin’s current downturn is that it coincides with news of blockchain protocol Terra’s stablecoin offering TerraUSD (UST) — which, as the name suggests, has its value pegged to the US Dollar in a ratio of 1:1 — witnessing a wipeout of almost $300 million and that from a single wallet address.
Over the past month or so, Terra has had the global Bitcoin community on the edge of its seat, especially since co-founder Do Kwon announced that his project will be acquiring $10 billion worth of Bitcoin over the coming months. The Luna Foundation Guard, Terra’s nonprofit arm, has already accrued 80,394 BTC to date — worth approximately $3.5 billion.
Lastly, as a result of this liquidation, UST saw its dollar peg sway by a factor of 0.8%. Many experts suggest that the dump was an attempt to malign the project’s growing popularity. Brazilian financier Caetano Manfrini was quoted as saying:
“Today’s attack on Terra-Luna-UST was deliberate and coordinated. Massive 285m UST dump on Curve and Binance by a single player followed by massive shorts on Luna and hundreds of Twitter posts. Pure staging. The project is bothering someone. On the right path!”
The future looks bleak for Bitcoin
From a macro perspective, Bitcoin has been forming a red candle pattern for over six weeks running, something that has not happened since 2014, implying that the asset’s fundamentals are currently weak. As a quick refresher, a “red candlestick chart” indicates that the closing price of an asset is below both the price at which it opened and previously closed in relation to a predefined time window.
To really put into perspective how bad things are currently, Bitcoin’s performance at the moment is even worse than what happened during March 2020, a time when the market at large witnessed a major drawdown, with the value of Bitcoin dipping from $8,000 to $4,000 within a 48-hour stretch.
Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.
Disclosure: The author owns a range of cryptocurrencies at the time of writing