May 2022 was not for the faint-hearted. Even the most beleaguered and experienced crypto traders were tested in the first two weeks of the month on a steep drop following the US Federal Reserve’s announcement that interest rates would rise by 0.5%.
Crypto exhibited a lower correlation to real-world events and was generally unaffected by capitalist successes and failures. However, a very stable rough peg between Bitcoin (BTC) and the S&P 500 has been seen throughout the first five months of 2022. Inflation and war fears have also not been favorable to either market. .
Crypto mimicking the equity market could be due to massive market capitalization growth in 2020 and 2021. At unprecedented rates, retail equity investors have flocked to cryptocurrencies, causing a much greater overlap in movements of price.
Bitcoin fell below $29,000 before rallying to $31,800 on May 31, while Ether (ETH) fell to just over $1,700 before recovering prices above $1,900 on May 31. May 30. about as much FUD as one might imagine.
Four stablecoins, two different directions
TerraUSD (UST) – now known as TerraUSD Classic (USTC) – was a stablecoin built on the Terra blockchain and ranked in the top six stablecoins by market capitalization. However, on May 9, the coin, which was designed to maintain a value of $1 all the time, gradually fell to $0.29, leaving the crypto world in shock. Its price has not recovered since.
In terms of the impact of this on the rest of the stablecoin landscape, a major “reshuffle of the game” resulted from the reputation of a trusted stablecoin implosing overnight. Tether (USDT), the largest stablecoin by market cap, saw its own, albeit much less drastic, drop to $0.95. It has since recovered, but there have been new claims about the coin’s solvency.
Dai (DAI) and USD Coin (USDC) appeared to be reaping the rewards of the debacle, as the chart above clearly indicates that the top 10 whale addresses of each stablecoin are showing an increased level of trust in these two assets, and the coins are moving in massive waves on USDT and UST (now TerraUSD Classic) exchanges. Binance USD (BUSD) also cannot be ignored, as the third-largest stablecoin reached a market capitalization of nearly $19 billion last month.
LUNA’s tragic fall from grace
UST’s sister token, LUNA Classic (LUNC) – the updated name of the original LUNA token – plunged from its all-time high of around $119 just seven weeks ago and now sits at a staggering 0, $000125, which equates to a -99.9999% drop in price and market cap. The $1 UST withdrawal seemed like the final nail in the coffin as the algorithm was not fast enough to burn LUNC when UST was in free fall due to large withdrawals on the peg protocol.
But while the LUNC story may seem like old news at this point, talk of LUNA 2 – the new version of LUNA – seems to be bringing new life and optimism. The project’s GitHub has actually exploded with new actions at a rate not seen since the original LUNC.
Bitcoin Trader Sentiment at Historic Pain Levels
Bitcoin could bottom as sentiment hit its most negative levels since March 2020. BTC’s social dominance is also getting smaller and smaller. Typically, three waves of reduced BTC dominance is a clear sign that traders are no longer interested in buying a frustrating and unpredictable “dip”. And when traders lose interest, prices historically wake up.
Among the social volume of Telegram, Reddit, and Twitter, the three platforms have seen wildly different crypto chat rates over the past year, let alone the past two months. Reddit saw by far the most notable spike when prices bottomed out about two weeks ago, while discussions on Telegram died down completely.
The amount of BTC held by whales is low, the number of addresses is increasing
There is good news and bad news regarding Bitcoin whale activity in May. The good news is that the number of whale addresses holding 100 to 1,000 BTC has been increasing for about four consecutive months now, a trend that started to recover in late January. Meanwhile, the bad news is that the actual total amount held by these whale addresses still shows a long-term dumping pattern dating back to late October, just before the all-time high.
Dai velocity remains low, a good sign for Ether
With the best altcoin Ether, there seems to be a correlation between its price and the amount of velocity, which is the average number of times a coin switches wallets each day, as seen on the Dai network.
A series of major spikes in Dai’s velocity were seen weeks after Ether’s all-time high in mid-November, but have been fairly dormant for the past few months. As long as this metric remains at low levels, there is no threat of an isolated dump for ETH compared to the rest of the cryptocurrency market.
Ethereum fees are also quite dormant, which is encouraging
In addition to the low speed on Dai, fees on the Ethereum network are approaching year-to-date lows. With such stagnation among many networks, this has resulted in a lower cost per transaction.
The chart above illustrates the massive spike in average fees (to $98) in mid-May. It was a clear sign that another decline was likely. One can only hope the fees stay low where the bulls like them.
Cointelegraph’s Market Insights newsletter shares our knowledge of the fundamentals that are moving the digital asset market. This analysis was prepared by leading analytics provider Santiment, a market intelligence platform that provides on-chain, social media and development insights on over 2,000 cryptocurrencies.
Santiment develops hundreds of tools, strategies, and indicators to help users better understand cryptocurrency market behavior and identify data-driven investment opportunities.
Disclaimer: Opinions expressed in the post are for general informational purposes only and are not intended to provide specific information tips or recommendations for an individual or on a specific title or investment product.