Panic appeared to set in on crypto markets overnight on May 11 as Blockchain protocol Terra failed to steady its bleeding cryptoassets.
Data from Cointelegraph Markets Pro and TradingView showed both the firm’s in-house token, LUNA and stablecoin, TerraUSD (UST) seeing fresh heavy losses on the day.
A dubious new “all-time high” for Bitcoin
After a mass sell-off which some argued was “coordinated” to destroy the Terra ecosystem, UST lost its peg to the U.S. dollar.
Attempts to shore up the peg with both LUNA and Bitcoin (BTC) reserves failed, and as uncertainty gripped the market, both UST and LUNA dived to levels unimaginable just days previously.
Getting close … stay strong, lunatics
— Do Kwon (@stablekwon) May 10, 2022
Co-founder Do Kwon said that a “recovery plan” was due for release, details still scant at the time of writing.
Rumors circulating online suggested that other major crypto firms may be willing to contribute funds to support the peg.
UST/USD 1-hour candle chart (Bitstamp). Source: TradingView
On May 11, UST traded at just $0.27, having briefly dived to lows of $0.25, 75% below dollar parity.
LUNA/USD was at $6, down over 90% in May alone.
LUNA/USD 1-day candle chart (Binance). Source: TradingView
A further unintended consequence of the turmoil came in the form of BTC/UST reaching nonsensical levels of almost $140,000 on major exchange Binance, which suspended LUNA and UST withdrawals on May 9.
Bitcoin performing “remarkably well”
Reacting, it was a mixture of shock and nervousness about the recovery of the market that pervaded analysts’ thoughts.
Attention also focused on largest USD stablecoin, Tether (USDT), as Tether chief technology officer Paolo Ardoino appeared equally surprised at recent events.
— Paolo Ardoino (@paoloardoino) May 11, 2022
Despite potential sell pressure on Bitcoin itself, however, the largest cryptocurrency had avoided a fresh dip below $30,000 at the time of writing.
“I think Bitcoin has held up remarkably well under the context of the Luna saga with its forced BTC selling. There continues to be a great deal of uncertainty in the market but for now the $30k level is broadly holding up well for Bitcoin,” Philip Swift, creator of analytics platform LookIntoBitcoin, told Cointelegraph in private comments.
“We are seeing a range of metrics on LookIntoBitcoin which show that BTC is approaching major ‘value’ levels where historically strong hands accumulate Bitcoin at value prices. There is also plenty of evidence that long term holders are not fazed by this near term volatility.”
BTC/USD, like other risk assets, faced another source of volatility on the day as U.S. CPI data was due for release.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
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