Market-Wide Sell off Continues as TerraUSD Implodes — Majors Remain Resilient

5 min readMay 11, 2022

As the Luna Foundation Group deploy the last of their remaining capital to maintain the UST peg, it appears that systemic risks in crypto are on the verge of subsiding.

Altcoins have suffered tremendously amidst the carnage, but Ethereum has so far held its own and even strengthened against Bitcoin.

Is the bottom finally in?

Let’s dig in.

Dear readers,

The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent.

Thank you for reading.

Feel free to contact me with feedback on contact@chrisoncrypto.com.

TerraUSD Capital Woes Shake Crypto Markets as UST loses Dollar Peg

TerraUSD was forced to use its Bitcoin and crypto reserves in order to mount a defence of the UST stablecoin, resulting in a market downturn and a liquidity-driven de-pegging event.

Read the full article here!

Technically speaking

Ethereum Bottoming Structure Paints $4,700 Price Target

Ethereum/Dollar was no outlier in this week’s UST-driven market implosion. ETH/USD fell 3.2% week on week as the UST systemic risk turned out to be a gaping $18 billion black hole rippling across crypto markets. On Wednesday, ETH/USD recovered 7.2% as forced market selling eases.

Market bottoms rarely look great. In fact, price action at the bottom tends to illicit a stomach-churning repulsive automatic response. Both BTC/USD and ETH/USD have opted to take this stance at the time of writing. Notably, ETH/BTC held up relatively well amid the 3-day-long carnage, strengthening 6.7% against BTC. This may be due to the fact that the Luna Foundation (LFG) once held 42,000 BTC reserves and had to offload these coins in a hurry in a doomed effort to save UST.

On a purely technical basis, ETH/USD bounced near macro support at $2,200. A daily deviation below $2,000 would be a no-brainer knife-catching risk/reward buying opportunity, but current levels are certainly not for selling. While there is always room for downward price-action, especially given the market-wide trend change in OBV, ETH/USD is trending within a multi-month falling wedge structure, the target of which is the range top — $4,700.

As prices corrected throughout the range/structure, each bottom was accompanied by volume spikes — a noteworthy data point of confluence. Short term upside would likely be capped at $2,800, however, after which further consolidation in the range becomes more probable. Bulls’ reaction to this drop will likely determine whether ETH/USD bottoms out around $2,200-$2,000 or if it ends up digging deeper.

While there is currently uncharacteristic Ethereum/Dollar strength amidst the wide-spread market downturn, it remains to be seen whether this situation is sustainable. I simply cannot consider the ETH/BTC pair with any confidence at current prices. The backdrop of macro-economic policy led by the US Federal Reserve has also resulted in various markets correlating strongly (stocks, commodities, crypto). Fed policy is particularly important while this correlation stands and that’s likely to continue until financial conditions somewhat normalise (i.e. quantitative tightening stops).

This could happen as early as June.

Polkadot Teeters on the Brink of Value Area

Polkadot/Dollar suffered a major pullback within the value area, reaching as low as $10.

Like many altcoins, Polkadot/Dollar is in a do-or-die situation after months of non-stop selling. The key level to reclaim is $14, which would put the crypto back within the macro trend. Dot’s future is dependent on blue-chip strength.

Litecoin Falls back to 2-digit Territory

Litecoin/Dollar exchanges hands below its crucial monthly support, which stands at $96. The technical and fundamental upgrades do not appear to be having much of an effect on the LTC/USD price just yet, which is interesting considering MWEB is not vapourware.

Litecoin is down 80% since its all time high in 2021, and has effectively completed an early-bitcoin style bear market cycle.

The stakes for LTC/USD have never been higher. Should LTC/USD close the month above $96, this would open the door for a recovery and perhaps even a strong rally on the back of the MWEB launch on May 19. But given my staunch support of LTC lately, please take this analysis with a grain of salt.

That said, the risk-to-reward for Litecoin is there regardless, especially when one considers that Coinbase paid someone $600 million for an NFT project. Crypto valuations make as much sense as a solar-powered flashlight. The market appears to value Jpegs more than a flawless decentralised network with active development, a new privacy-use case and just good-faith non-VC-funded backers.

I still maintain that Litecoin is a sleeping giant with real value as opposed to promises of what it could be.

The mismatch between price-action and fundamental value was recently characterised in this twitter thread. Even someone as learned as Tuur Demeester thinks Litecoin had a pre-mine, but it’s literally a fantasy, as are most criticisms levied against LTC.

Only the hard and strong will come out on top. Only the hard — only the strong. Bitcoiners know it, I know it, Litecoiners will know it too.

p.s. This is my opinion. It is not financial advice.

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