After heavy correction, crypto investors get a breather as the broader crypto market shows recovery. Is this a trend reversal or just a dead cat bounce?
After a severe market crash earlier this week, there’s some sort of relief rally in the overall crypto space. The world’s largest cryptocurrency has rebounded by over 10% and trading back above $30,000. Furthermore, investors in the crypto space are grappling with the biggest-ever crash in the crypto space, Terra LUNA. The recent turn of events in the Terra ecosystem has shaken investors’ trust.
But it’s not Bitcoin alone, the overall crypto market shows 10% gains in the last 24-hours. In the altcoin space, Ether (ETH) continues to follow BTC with 10.89% gains. This move has helped ETH to keep its price above $2,000.
All other top ten altcoins have posted gains anywhere between 20-40%. Well, it’s difficult to state whether this is a trend reversal or just a dead cat bounce. All it does is it gives some breathing space to crypto investors for a while.
In the last 45 days, the overall crypto market has lost 33% of its valuation. It has eroded more than $800 billion of investors’ wealth in no time. The global macroeconomic setup has been partly responsible for it. The steep correction in the US equity market has sent shockwaves to crypto as well.
Terra LUNA Crashes to $0
In the last 24 hours, Terra’s native cryptocurrency LUNA has lost all of its value crashing all the way down to zero. Last Friday, Terra’s UST stablecoin started to de-peg from the US Dollar. Since the UST stablecoin is algorithmic, the system generated more and more amount of LUNA tokens.
This excessive liquidity resulted in major sell order driving the price of LUNA all the way down to $0. Following the recent turmoil, the Terra developers have decided to halt the blockchain. The official announcement reads:
“The Terra blockchain has officially halted at block 7607789. Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come”.
Similarly, the UST has lost a majority of the peg and is currently trading for 16 cents. Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno said:
“The Luna/UST situation has hit market confidence quite badly. Overall most cryptocurrencies are down [more than] 50%. Combining this with global inflation and growth fears, does not bode well in general for crypto”.
He also adds that the recent Bitcoin price bounce may not be sustainable. “In such markets, its normal to see bounces amounting to 10-30%. These are normally bear market bounces, testing previous support levels as resistance,” Ayyar said.
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