Good morning and welcome to First Mover. Here's what happened this morning:
- Market Moves: Macroeconomic headwinds continue to push Bitcoin lower. A popular indicator suggests institutions are selling into a falling market. Two charts give hope to battered Bitcoin bulls.
And watch CoinDesk TV's "First Mover" show hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern Time.
- Steven McClurg, CIO and co-founder, Valkyrie
- Cory Klippsten, CEO, Swan Bitcoin
- Maxim Galash, CEO, Coinchange
Market Movements.
It's a new week, but the same old story in the financial markets. The U.S. dollar is trading higher again, while macroeconomic headwinds are weighing on stocks, bonds and cryptocurrencies.
Bitcoin, the top cryptocurrency by market value, was trading at a 3.5-month low of $33,080 at press time, down 3% on the day, according to CoinDesk.
"Investors are clearly concerned about the U.S. Federal Reserve's aggressive monetary policy as it will also begin quantitative tightening (withdrawing liquidity from the market) in June," Marcus Sotiriou, an analyst at U.K.-based digital asset broker GlobalBlock, said in an email.
Institutional selling
Popular indicators suggest institutions are selling in a falling market.
The "Coinbase Premium Index," an indicator that shows the difference between Coinbase's BTC/U.S. dollar (USD) pair and Binance's BTC/USDT pair, which includes the Tether stablecoin, recently turned negative and fell to a 12-month low, according to data from South Korean firm Cryptoquant.
"This [negative Coinbase premium] is significant because a larger percentage of institutions use Coinbase compared to retail customers, while the opposite is true for Binance. Therefore, the aforementioned price discrepancy suggests that institutions are currently not as interested as retailers," Sotiriou said. "It's good to keep an eye on this going forward, and if this reverses, it could coincide with an easing of the market or a reversal."
CryptoQuant said in a Quicktake blog: "Normally there is a Coinbase premium. This means that the bitcoin price on Coinbase is higher than on Binance. This was/is very important because American institutions and HNW (High Net Worth) traded mainly on Coinbase. However, in the last few days it is negative. This indicates heavy selling on Coinbase Pro!"
Terra jitters
Programmable blockchain Terra's UST, the world's largest decentralized stablecoin, lost its $1-for-1 peg over the weekend following multi-million dollar UST sales on Curve and Binance, as well as a number of significant withdrawals from Anchor Protocol, a credit market that offers UST depositors high yields.
The removal of the peg could add to the downward pressure on Bitcoin and the broader crypto market. "People are afraid that Luna Foundation Guard [LFG] will have to sell their BTC to shore up the UST peg, so BTC will be sold," Ilan Solot, a partner at Tagus Capital Multi-Strategy Fund, said in an email.
"Keep in mind that Terra Foundation is the second largest corporate holder of BTC after MicroStrategy and Tesla," Solot added.
Stablecoin was 0.5% below its peak at the time of writing. Terra founder Do Kown tweeted early Monday that LFG had agreed to deploy $1.5 billion in capital to defend the peg, while assuring the market that the foundation was not trying to abandon its bitcoin position.
Some 'hope'
Amid the gloom, two charts may offer some "hopium" - crypto slang for hope - to battered bitcoin bulls.
The first is Bitcoin's implied volatility (IV) - options traders' expectations for price turbulence in a given period. The one-week implied volatility has risen above the six-week level, indicating the peak of fear.
A similar IV structure has marked temporary/intermediate price lows in the past.
Second, the technical chart of the Dollar Index (DXY) shows that the 50-week moving average is on track to move above the 200-week MA, confirming the so-called bullish crossover (Editor's Note: The newsletter mistakenly referred to "monthly" moving averages).
While the golden cross is a bullish indicator according to technical analysis theory, in reality it is a lagging indicator that often leads traders to the wrong side of the market. In other words, the DXY may be approaching an intermediate high. Dollar weakness is seen as a positive for risk assets, including cryptocurrencies.
Last Headlines.
- LDO token of staking tool Lido DAO rises ahead of Binance listing
- Bitstamp appoints JB Graftieaux as CEO following departure of Julian Sawyer
- How big is crypto crime really?
- Luna Foundation Guard Lens $1.5B in BTC and UST for Stablecoin Peg
- First mover Asia: BitMEX saga continues to leave fundamental regulatory issues unresolved; bitcoin continues to fall
Today's newsletter was edited by Omkar Godbole and produced by Parikshit Mishra and Stephen Alpher.