It’s been exactly a week since the last Fed meeting. For the cryptocurrency market, this week has been a terrible one. Over the week, Bitcoin fell by 27.5% and fell below $30,000. Ethereum fell by 32.7%, and XRP lost 40% of its value. The leader became Luna cryptocurrency. It lost 99% of its value. Imagine, at the beginning of the month the price of this coin was above 85 dollars, and today the coin is worth less than a dollar.
The exit of capital from risky assets accelerated after the publication of data on inflation in the US. The Bureau of Statistics reported that consumer prices rose by 8.3% in April, well above analysts forecasts.
The Fed creates conditions under which investors massively dump shares of the IT sector. The exit of capital from the technology sector provoked a fall in the S&P 500 and Nasdaq indices, with which Bitcoin correlates.
The dollar index rose today to its highest level since December 2002. Accordingly, risky assets, including Bitcoin, inevitably become cheaper in such a situation. In just five days, investors sold 100K BTC. Investors began to view Bitcoin as a risky asset and in a hurry tried to protect their profits.
However, it is worth paying attention to another reason for the market fall – TerraUSD (UST). Its project Luna (an unsecured stablecoin) lost 99% of its value. It is worth noting that it is different from regular stablecoins such as USDT or USDC, which are backed by fiat money or its equivalent.
The drop in Terra(LUNA) led to BTC worth $3 billion being sold over five days from the Luna Foundation’s guard reserve, reducing the reserve balance from $10 billion to $110.82 million.
It is worth noting that the Fear Index hit its lowest point for the second time this year. Investors lost optimism. Even the whales began to sell their assets. The market recorded 35,000 orders worth over $100,000. This is the highest figure since January of this year.
The Bitcoin sell-off has reduced the number of whales. Now their number has decreased to 1776 (an 18-month low). As we know, whales shape market sentiment and are the main price driver in one direction or another. Shrimps observe the behavior of whales and follow them.
Analysts are talking about a market decline for at least another couple of days. If the price of Bitcoin falls below $28,000, we will see a decline toward $27,700. A downside break would send the price to $27,200, below which bears could target a move to $26,500.