First mover Americas_ Bitcoin struggles to make $30K ahead of Fed minutes

First mover Americas_ Bitcoin struggles to make $30K ahead of Fed minutes

The latest movements in the crypto markets in the context of May 25, 2022.

Good morning and welcome to First Mover. I'm Lyllah Ledesma, here to guide you through the latest crypto markets, news and insights.

  • Price Point: Bitcoin does not appear to be breaking the $30,000 threshold ahead of the Fed minutes release later today. Ethereum Classic is performing against the market and is up 10% on the day.
  • Market Movements: According to data from Arcane Research, bitcoin options traders are focusing more than ever on hedging their exposure.
  • Feature: A snapshot of the Terra blockchain is expected this week. Shaurya Malwa takes a look at how the "new" LUNA will be distributed.

Price Point.

Bitcoin (BTC) traded higher during the day, but failed to hold above the $30,000 threshold. The world's largest cryptocurrency by market capitalization has lost more than half its value from its November 2021 all-time high of $69,000.

BTC briefly reached $30,000 in early trading hours on Wednesday, but has since fallen to around $29,600. It rose 1.1% in the last 24 hours.

Ethereum fell 0.6% during the day and is struggling to stay above $2,000.

Ethereum Classic (ETC), which has a market cap of $3.19 billion, performed against the market and traded up 10% during the day. Ethereum Classic is a blockchain created after a controversial hard fork of the Ethereum blockchain in 2016. Like Ethereum, it supports smart contracts and decentralized applications called Dapps.

In traditional markets, Asian stocks edged higher, while U.S. stock index futures gave up earlier gains as investors awaited minutes from the Federal Reserve's latest policy meeting. These are scheduled to be released Wednesday at 2 p.m. ET (18:00 UTC) to be released.

Market Movements.

While investors wait for the Fed minutes, trading in the crypto market is relatively subdued.

Matthew Dibb, co-founder of Stack Funds, said he does not expect an overly optimistic outcome from the release given the Fed's recent wording.

For cryptocurrencies, Dibb doesn't predict much of an impact. "Our expectation for cryptocurrencies is generally a continuation of the current range or a slight downtrend as the macroeconomy leads the way," Dibb said.

Marcus Sotiriou, an analyst at U.K.-based digital asset broker GlobalBlock, said the Fed minutes could trigger a relief rally for cryptocurrencies in the short term.

"As the FOMC makes important decisions on interest rates and money supply growth in the United States, these meeting minutes will be crucial for bitcoin prices in the short term," Sotiriou said. FOMC stands for Federal Open Market Committee - the Fed's monetary policy-making body.

If the Fed indicates some restraint for the first time in a long time by not mentioning a 75 basis point hike or a pause in tightening monetary policy while returning to neutral rates, Sotiriou said that would be positive and could lead to a rise in the bitcoin price in the next week or two.

On-chain metrics

According to Arcane Research data, bitcoin options traders are focusing more on hedging their exposure than ever before.

Options traders are hedging in a big way, as evidenced by skew values hitting new highs across all maturities. The 25-delta skew shows the difference between the implied volatility of put and call options with the same maturity. A positive skew signals higher demand for put options than for call options, indicating that traders are more bearish.

"These skew values are unprecedented in the history of the bitcoin options market and indicate a very bearish outlook among options traders," Arcane Research wrote in its weekly update.

The one-month (25D) skew hit a 24-hour average high of 24% on May 12, surpassing the May peaks of 2020 and 2021.

The 6-month 25D skew also shows strong demand for puts, according to Arcane Research data. It currently stands at 12.57%. For longer maturities, the current highs were not reached until June 1, 2021, when the 6-month skew peaked at 4.75%.

Last Headlines.

  • Andreessen Horowitz Launches Its Fourth Crypto Fund Worth $4.5 Billion Silicon Valley venture capital firm Andreessen Horowitz is doubling its crypto investments despite the market downturn.
  • Crypto asset managers chase returns with new investment products A cocktail of high inflation and money-hungry crypto companies is prompting fund issuers like Bitwise and 21Shares to get creative.
  • Soona Amhaz's Volt Launches $50 Million Crypto Fund Backed by Marc Andreessen and Chris Dixon The VC firm will continue to focus on infrastructure, DeFi, NFTs and DAOs.
  • DeFi Platform Lido Votes Against Supporting New Terra Blockchain The plan to revive Terra was approved by network validators on Wednesday.
  • Web 3 Education Platform Pitches 'Earn While You Learn' to Business Executives's mix of crypto incentivization and education already boasts 2,000 users, founder Shelly Palmer told CoinDesk.

Feature:Terra Snapshot is expected this week. Here's how "new" Luna will be distributed

By Shaurya Malwa

A snapshot of the Terra blockchain is expected to take place later this week ahead of the launch of "Terra 2.0," a so-called revival of the Terra ecosystem following the implosion of terraUSD (UST) earlier this month.

The revitalization plan is now moving forward after a vote among network validators concluded Wednesday with a 65% approval rate.

Investors who owned more than 10,000 LUNA before the UST implosion will receive the new tokens at regular intervals to prevent an immediate sale. More than 30% of their tokens will be unlocked initially, and the remaining 70% will be released and unlocked over the course of two years. New tokens will be distributed to these holders after six months.

Holders of wallets with more than 1 million LUNA or UST before the elimination of UST would have to wait more than a year before receiving tokens, with a subsequent four-year lockout period, according to the revitalization plan.

A snapshot - that is, a record of the state of a blockchain at a given point in time - will allow Terra to send the newly issued LUNA tokens to the holders of the old LUNA. This would theoretically allow the old holders to recover some of their lost investment value while incentivizing them to use the new blockchain.

The snapshot for Terra 2.0 is expected on May 26. "Going by block times, the post-snapshot block, 7,790,000, could happen as early as May 26, 2022, 16:20:00 UTC," Terra developers said in a post Tuesday.

"The supply at Genesis is significantly lower than anyone expected, closer to 116.7M and rising to 182M after 1 year," they added, addressing community concerns about a highly inflated Luna supply.

How the rapid-fire plan came about

In early May, UST lost its peg to the U.S. dollar and fell as low as 7 cents in the weeks that followed, leading to a 99.7% drop in the price of related Luna tokens (LUNA) and over $28 billion in outflows from Terra-based decentralized financial apps (DeFi).

This led to a drop in sentiment among LUNA investors and traders, and apparently even sparked public outrage in Korea, where Terra had a large community, and some crypto funds saw billions of dollars in losses.

Terra's often brusque founder, Do Kwon, proposed a revitalization plan in the days afterward that includes a "fork" of the blockchain and an "airdrop" for holders affected by the UST implosion.

The plan seeks to reunite the community and restore its trust in the Terra ecosystem.

A "fork" of a blockchain refers to the creation of a new blockchain in which the data from the old blockchain is prepended to the data from the newer blockchain. However, Terra developers have stated that "Terra 2.0" will be an entirely new project, meaning that no data will be transferred from the current chain to the new one.

The revival plan, despite being approved by Terra's network validators, went live despite the results of a preliminary online poll on the hard fork plan finding minimal support among community members.

About 92% of more than 6,220 voters in a previously conducted online poll voted against the change, with the most popular responses calling for "no secession," according to reports.

LUNA prices have risen over 6.2% in the last 24 hours.

Today's newsletter was edited by Lyllah Ledesma and prepared by Parikshit Mishra and Stephen Alpher.