A Rough Day in the Market

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2022-08-03 07:24:40

Market situation

Yesterday, the stock market and also the crypto market fell sharply. BTC at one point dropped continuously to $29,700 and then recovered to around $30,000. Altcoins also plummeted according to BTC. Terra alone has reduced by more than 50%.

US stocks continued to fall sharply. The biggest drop was the Nasdaq, which fell 4.29%. The stock futures market is more upbeat and mildly green.

The Fear and Greed Index in both the crypto and stock markets shows extreme fear.

The percentage of BTC profitable has dropped to a very low level, more than 54%.

Recently there are also signs of a certain number of miners being pushed to the sale floor.

Yesterday, Bitcoin was pushed to the exchange more than deposited. BTC sign pushed up to sell.

The number of BTC on exchanges also increased. However, the long-term trend is still downtrend and has not changed.

Ethereum has also been pushed to the exchange more than withdrawn in recent days.

Investors are concerned about the risk of economic crisis

The S&P 500 index traded at an intraday low of 3,975.48, dipping below the 4,000 mark to its lowest level since March 2021 and down 17% from a 52-week high as traders struggled to recover. after the big market volatility of last week. All sectors except consumer staples are in the red.

The world’s biggest tech companies have shed more than $1 trillion in value in just three trading sessions. Apple, the world’s most valuable public company, has shed $220 billion in value since the close of trading last Wednesday. Other big losses in the past three trading days such as Microsoft lost about 189 billion USD in value, Tesla’s decline recorded at 199 billion USD, …

Shares of companies listed on the US stock exchange in 2021 are even worse. Some of the names mentioned such as Coinbase, Robinhood, Rivian, UiPath, Marqeta and Toast have all lost at least 65% of their original value.

As for the crypto market, after three days the whole market has dropped by $234 billion. BTC alone has dropped by $106 billion.

The selling force in the US stock market and crypto is both due to anxiety about a possible financial crisis. Investors found that the growth prospects of companies were not optimistic and the Fed raised interest rates, tightening market cash flow. Inflation in the US has increased and the FED is expected to raise interest rates at the next meeting.

Companies have also taken steps to prepare for the worse. Uber announced a reduction in spending and caution when hiring more people. Last week, Facebook stopped hiring new employees. Robinhood Company laid off 9% of its employees last week. Companies are looking to cut spending, expenses and financial provisions. Investors want to sell assets and convert to cash. This leads to markets like stocks going down.

Terra USD fell sharply

One event that is believed to have had some impact on the crypto market’s decline was that Terra’s stablecoin UST plummeted as low as 68 cents.

UST is an algorithmic stablecoin whose supply expands by burning LUNA, Terra’s native asset. When demand for UST pushes the price above a dollar, LUNA is burned to mine more, restoring the rate. Over the past six months, UST’s market capitalization has skyrocketed from less than $3 billion to over $18 billion.

As the market cap of UST increases, the supply of LUNA decreases, putting pressure on the price causing the price of LUNA to increase. But on the contrary, when the contract UST supply and the price fall below one USD, LUNA is minted and sold to restore equilibrium.

The drop in UST occurred as there were two major selling of UST. The first was the Terra blockchain transferring 85 million UST via the Wormhole bridge to Ethereum, which was quickly sold on Curve on May 7. Next, another $108 million in UST from the same Terra address was sent to the Binance exchange. and sold. That is, within a day, 193 million USTs were sold, leading to the price of UST falling below 1 USD.

When the price of UST fell below 1 USD, investors worried and large accounts began to withdraw UST from the Anchor Protocol staking protocol of millions. Anchor deposits have dropped by almost a quarter, or about $3.5 billion have been withdrawn. A major market operator had to sell a large amount of ETH to rebalance the UST Curve pool and support the price.

In an effort to restore confidence, the Luna Foundation Guard (LFG) has announced that it will lend $750 million in Bitcoin and an equivalent amount of UST. This BTC is sold to a professional market maker to facilitate the arbitrage operations necessary to maintain the USD rate. Many people believe that LFG sold the above BTC.

In the past day, LFG’s BTC wallet removed all BTC from the wallet and the balance in the wallet returned to 0. This further makes investors lose confidence in UST. The price of LUNA yesterday also dropped by 60%.

Some other information:

  • MacroStrategy, a subsidiary of MicroStrategy (MSTR), borrowed $205 million from crypto payment service provider Silvergate Bank (SI) to purchase BTC. The bitcoin-backed loan is worth about $820 million. Many fear that if BTC drops below $29,000, MicroStrategy’s collateral BTC will be liquidated. Company CEO Michael Saylor has voiced that theoretically, there is hardly any price low enough for MicroStrategy to need to be an obligatory Bitcoin seller.

  • The President of El Salvador yesterday announced that the country had purchased another 500 BTC at a price of 30,744 USD. Recently, the president of the country also shared more information about their volcanic city, although the sale of volcanic bonds is delayed.

  • Australia’s Bitcoin and Ethereum spot ETFs will begin trading this Thursday, according to Bloomberg.

  • Meta is taking the next step in its evolution from being an ad-supported social network to a hardware-driven technology company for the metaverse. Initially, Meta opened its first retail store so that users could experience their products.

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#Rough #Day #Market

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