The Outflow of Crypto Money

Market Recap

Entire crypto market got hit by the Terra meltdown. The $UST de-peg and $LUNA failure wiped out over $300b from the market, leaving the total crypto market cap at $1.3T today.

Derivatives Market

Funding premiums elevated during volatile market, BTC and ETH funding rates turned positive while the rates for alts went south.

Chart 1: 7dma of BTC, ETH Perpetual Futures Funding Rate (Source: FTX)
Chart 2: 4hr BTC liquidation chart (Source: Coinglass)
(May 16, 2022, Major Crypto KPI)

Altcoins Roundups

Altcoins have had one of the worst weeks ever in recent years, with many top L1 tokens down over 80% from their ATH. ($SOL -31.5%; $AVAX -33.5%; $LUNA -99.9% as $UST de-peg; DOT -14.3%; ADA -19.8%). Stablecoins except $UST were the outperformers this week ($USDC +0.3%; $BUSD +0.2%).

Crypto Updates

$LUNA <> $UST triggered the death spiral and recorded another biggest failure in the development of algorithmic stablecoin. $UST de-pegged, $LUNA hyper-inflated and lost ~100% of its value in 3 days, many exchanges including Binance, FTX and Bybit, started to delist related trading pairs and their derivatives. Since both $LUNA and $UST were top coins in the crypto space before default, this led to severe drawdown in the entire crypto market with over $300b outflow of capital.

Regulatory Updates

Whilst $UST struggled to retain its dollar peg, US Treasury Secretary Janet Yellen pushed regulation on stablecoin by the end of 2022. She mentioned that the new technology would increase innovations and efficiency but posed risks to the financial system, therefore required coordinated regulatory attention.

Institutional Updates

The Japanese investment bank, Nomura, joined the rivals including JPMorgan and Goldman Sachs to start offering Bitcoin derivatives to clients, including Bitcoin non-deliverable forwards and options.

Macro Front

The incoming 50bps interest rate hike and 8.3% April CPI announced last week worsened entire global market. Equities dropped significantly after the CPI announcement last week, which was 0.2% higher than expectation (S&P500 -2.4%; DJIA -2.1%; NQ -2.5%). Commodities also suffered as investors tend to be more conservative at current market sentiment, with Wheat outperforming the basket (Gold -3.8%; Oil -0.8%; Wheat +6.2%).

Conclusion

Interest rate hike, global inflation concern, stablecoin regulation and $LUNA <> $UST failure posed extreme fear to the crypto market. Market is extremely volatile, be patient and keep your capital. Good Luck!

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