Crypto newsletter: Bitcoin trades below $30000 as traders digest Terra crash

• Bitcoin is testing major support at $29,000.
• The total volume of Ethereum tokens stacked in the ETH2 contract reached new ATH.
• Musk believes DOGE has potential as a currency.
• Do Kwon proposes to fork Terra’s LUNA to a new chain

The cryptocurrency market faced nothing short of a bloodbath last week. De-pegging of stablecoins and collapse of LUNA mixed with geopolitical unrest, rising interest rates, recessionary fears cast a shadow over the whole digital currencies market. Bitcoin plunged to near the $25,000  the lowest level since December 2020, drastically down from its all time high of $69,000. Other major projects also suffered heavy losses, with ETHEREUM dropped to $1,700. Bulls become more active over the weekend and the most popular crypto managed to briefly jump above $31,000. However sellers regain control regain control on Monday, following weak data from China. Nevertheless scale of the drop is nowhere near as big as in the previous week and some analysts believe that that downward correction may be over. Others, like legendary investor Bill Miller believe that bitcoin may continue to decline in the short term and even drop by half from current levels, however he looks at bitcoin positively and expects it to grow over a long time. Bitcoin's market dominance increased to 44.4%. The capitalization of all digital assets in circulation fell to 1.28 trillion, while an average daily trading volume is registered at $ 87.26 billion according to data from CoinMarketCap.

The cryptocurrency fear and greed index fell to 9 points on Saturday, the lowest level since March 2020. Today the index jumped to 14 points, however it continues to be in "extreme fear" territory. While extreme fear often indicates that the market reached local low, it may be too early to catch the falling knife as long as the macro uncertainty persists. Source: Alternative me

Bitcoin:

• President Nayib Bukele of El Salvador revealed that 32 central banks and 12 financial authorities are meeting in El Salvador, and the agenda is the digital economy and banking for the unbanked. The meeting which will take place on May 17, 2022 may be a milestone event, and proponents expect a positive impact on Bitcoin adoption, utility and price in the long term. 
• Goldman Sachs and Barclays invest in UK crypto trading platform Elwood Technologies, founded by billionaire British hedge fund manager Alan Howard. Elwood said it's betting that traditional financial institutions such as hedge funds and banks will still be interested in investing in cryptocurrencies despite recent sell-off. 

The correlation between bitcoin and the S&P 500 has reached a previously unseen level. Source: Glassnode/ SwissBlock

Despite negative sentiment, bitcoin recorded inflows of $45 million in inflows following last week’s $131 million outflows. Source: Glassnode/ SwissBlock

Bitcoin has lost around one fifth of its value so far this month. Buyers attempted to recover some losses over the weekend, however the upward move turned out to be short-lived. It seems that only a proper reversal above resistance around $38,000 would negate the bearish sentiment. Currently price is testing major support around $29,000 which coincides with lower limit of the descending channel. Should break lower occur, downward move may accelerate towards next support around $25,000 which halted declines last week. Source: xStation5

Ethereum:

• The number of Ethereum tokens staked in the Eth2 contract has reached a new all-time high of 12.59 million, which is considered a bullish sign as it lowers the number of tokens available to sell and contributes to the "shortage" across exchanges. 
• More than 2.3 million ETH have been destroyed so far according to data from burn portal. Together with tokens locked, over 14.90 million ETH have been taken out of circulation, reducing supply by 12.31%, which may drive up prices in the long-term. 
• However things look more bearish in the short-term. ETH reserves across exchanges have increased with a rise in netflow of the altcoin. 

The availability of a large quantity of ETH on an exchange platform increases selling pressure on the altcoin, and usually pushes prices lower. Source: CryptoQuant

Ethereum fell below $1700 level last week, however buyers managed to halt declines and price rebounded to local resistance at $2170. Nevertheless as long as the price sits below this level, continuation of the downward pressure looks probable. Source: xStation5 

DOGE:

• Tesla CEO Elon Musk recently made bullish comments on Dogecoin despite the recent sell-off. Musk affirmed that DOGE has potential as a currency. 
• Another positive factor is the high volume of DOGE held by whales and investors across exchanges. Robinhood holds 30.97% of the meme coin’s circulating supply on behalf of its investors. 

DOGECOIN similar to other projects, suffered heavy losses last week. Downward move reached support at $0.65 which coincides with the earlier broken upper limit of the descending channel. Since then price managed to erase some losses and is approaching psychological resistance at $1.00. Source: xStation5

Terra

• In a recent tweet, Terra announced that its blockchain resumed block production and some investors hoped that price could rebound. However the developers increased the token's circulating supply from around 377 million to more than 170 billion tokens, which could make it nearly impossible to recover even a small part of the recent losses .

The number of Luna tokens in circulation rose sharply. Source: Messari

• CEO of Terraform Labs Do Kwon has written a proposal to fork LUNA to a new chain with a cap of 1 billion coins. Binance CEO CZ believes this plan will not save the project as forking does not add value to the new fork.
• After the recent crash of the Terra ecosystem, United Kingdom’s Department of Treasury, has reportedly decided to regulate stablecoins as legal tender, accordingly to Cointelegraph.