May 2022 was not for the faint-hearted. Even the most embittered and seasoned crypto traders were tested in the first two weeks of the month on a brutal fall after the United States Federal Reserve announced that interest rates would rise by 0.5%.
Crypto displayed little correlation with real-world events and was generally unaffected by capitalist successes and failures. However, a very stable projected peg between bitcoin (BTC) and the S&P 500 index was seen in the first five months of 2022. Inflation and war fears have not been kind to the markets either.
Cryptocurrencies mimicking the equity market could be due for massive market capitalization growth in 2020 and 2021. At unprecedented rates, retail investors have flocked to cryptocurrencies from equities, leaving far greater overlap in price movements.
Bitcoin fell below $29,000 to return to $31,800 on May 31, while ether (ETH) fell just above $1,700 before retesting prices above $1,900 by May 30. But many altcoins underperformed, and the resulting reactions from once patient traders turned into almost as much FUD as one would imagine.
Four stable coins, two different directions
TeraUSD (UST) was a stablecoin built on the Tera blockchain and sat in the top six stablecoins by market cap. However, on May 9, the coin, which was designed to maintain a $1 value at all times, progressively dropped to $0.29, leaving the crypto world in shock. Since then its price has not been recovered.
As for how this affects the rest of the stablecoin landscape, a major “shuffle of the deck” resulted from an overnight explosion of the reputation of a reliable stablecoin. The largest stablecoin by market cap, Tether (USDT), saw itself decline, albeit a far less sharp one, falling to $0.95. It has since recovered, but there have been renewed claims about the coin’s solvency.
The bounty between Dai and the USD Coin (USDC) debacle appears to be reaping as the chart above clearly indicates that the top 10 largest whale addresses from each stablecoin show an increased confidence level in these two assets, and the coin USDT. From the exchanges are moving in massive waves. and UST (now TeraUSD Classic). Binance USD (BUSD) also cannot be ignored, as the third-largest stablecoin soared to a nearly $19-billion market cap last month.
LUNA’s Tragic Fall from Grace
UST’s sister token Luna Classic (LUNC) fell from its all-time high of $119 just seven weeks ago and now sits at $0.000125, equivalent to a -99.9999% decrease in price and market cap. The dipping of UST from $1 appeared as the final nail in the coffin because the algorithm was not fast enough to burn LUNC when UST was in freefall due to the large takedown on the anchor protocol.
But while the LUNC story may seem like old news at the moment, talks of LUNA 2.0 bring some new life and optimism. The project’s GitHub has really exploded with new action that’s never been seen since the original LUNC.
Bitcoin trader sentiment at historical pain levels
With sentiment reaching its most negative level since March 2020, Bitcoin could reach the bottom. The social dominance of BTC is also getting smaller and smaller. Generally speaking, three waves of lower BTC dominance is a clear indication that traders are no longer interested in buying the disappointing and unexpected “fall”. And when traders lose interest, prices historically wake up.
Telegram, Reddit and Twitter In social volume, the three platforms have seen wildly different discussion rates about crypto over the past few months, let alone the past few months. Reddit saw the most notable increase ever, when prices bottomed out about two weeks ago, while Telegram discussions ended entirely.
The amount of BTC held by whales is down, address numbers increase
There is good and bad news about May Bitcoin whale activity. The good news is that the number of whale addresses holding 100-1,000 BTC has now increased in about four months, a trend that began to see a turnaround in late January. Meanwhile, the bad news is that the actual totals held by these whale addresses still show a long-term dump pattern that dates back to the end of October, just past an all-time high.
Dai remains low, a good sign for Ether
With the top altcoin Ether, there appears to be a correlation between its price and velocity volume, which is the average number of times a coin changes wallets each day, as seen on the Dai network.
A series of major spikes in Dai’s velocity were seen weeks after Ether’s mid-November all-time high, but have been fairly dormant in recent months. As long as this metric remains at low levels, there is no risk of a different dump for ETH than the rest of the cryptocurrency market.
Ethereum fees are also encouragingly quite dormant
On top of the low velocity on Dai, fees on the Ethereum network are approaching year lows. Due to so many pauses between multiple networks, the cost per transaction has dropped.
The above chart Average charges in mid-May[$ 98]shows a significant increase in This was a clear indication that some further downside was likely. One can only hope that the fees remain low where the bulls like them.
Cointelegraph’s Market Insights newsletter shares our knowledge on the fundamentals that drive the digital asset market forward. The analysis was prepared by leading analytics provider Santiment, a market intelligence platform that provides on-chain, social media and development information on 2,000+ cryptocurrencies.
Sentiment 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 No intended to provide specific Advice or recommendations on any specific security for any person or Investment the product.