A week has passed since the fall of the Terra ecosystem and Alejandro Zala, Country Manager of Bitpanda Spain, has shared with Cointelegraph en Español his analysis of Bitcoin and the cryptocurrency market in general, which, according to him, are trying to bottom out and find stability.
For Zala, the fall of UST and LUNA has been one of the biggest events in the recent history of cryptocurrencies, similar to the collapse of Mt. Gox in 2014. This time LUNA fell almost to zero and the algorithmic stablecoin UST lost its peg. with the dollar.
“This event was a major setback for investors, especially those who were storing their savings in UST, and also raised questions about other stablecoins. Investors withdrew around €6.6 billion from the main stablecoin, Tether (USDT),” Zala commented.
“As a result, Tether’s outstanding supply dropped by around 10% and USDT also briefly shed its dollar peg. However, USDT remains the third largest coin by market cap, after Bitcoin and Ethereum,” he added.
Zala, for his part, noted that in theory stablecoins like USDT and other similar competitors are meant to hold enough fiat currency in their reserves to allow users to exchange their stablecoin reserves for fiat currencies.
“These reserves are held in cash and cash equivalents, including treasury bills, but LUNA’s case was different as its UST held reserves in Bitcoin and other major cryptocurrencies,” he explained.
Bitcoin could be finding its ground
As Zala explained, normally, after big drops, it takes time for the market to stabilize and for investors to digest the news and data. He mentions that at the moment, technical indicators are showing mixed signals. “While the cryptocurrency markets move in sync with the traditional financial market, especially the major US stock indices. The traditional stock market is also moving lower, with all the macro factors contributing to increasing downward pressure” he commented.
Last week, Bitcoin closed with a somewhat bullish weekly candle, which can be interpreted as a bullish hammer formation, with the real body sitting in the 30% range of the full candle. In this regard, Zala pointed out that this formation, combined with a weekly breakout failure pattern, may imply that a change in trend is pending.
“Bitcoin’s daily chart shows a trading range between €27,400 and €30,250, in the same zone as the support levels of summer 2021. A break above or below this range can show the direction of the next price movement,” he explained.
Crypto market sentiment remains in extreme fear
On the other hand, Zala comments that the collapse of UST and LUNA has probably represented an event of fundamental capitulation, which has marked the reactions of selling and panic. He also mentions the emotional bias of traders, which is driven by fear and greed, and is currently pointing to extreme fear levels for the second week in a row. “Last week, the cryptocurrency fear and greed index rose slightly and now stands at 13/100,” Zala mentioned.
He also noted that historically, buying in regions of extreme fear has been more profitable than selling or shorting in deep bear phases. However, the process of bottoming out after a big drop can take a long time to absorb all the negativity.
Major altcoins recover slowly
As for Ethereum and other major altcoins, Zala underscored that they are showing signs of recovery, although the situation remains uncertain. “ETH price saw a local bottom at €1,760. The first degree of upper resistance lies at the €2,300 level, while support on the downside lies at €1,760,” he said.
“Although May was an unlucky month for Ethereum in terms of price, it turned out to be a good one when it comes to mining. Following a steady rise throughout April, Ethereum mining hashrate peaked at 1,126,674.2703 GH/s on May 13,” Zala added.
On Solana, Zala highlighted that it has been one of the best performing crypto projects for the past 18 months, but it also took one of the hardest hits last week as almost all smart contract tokens crashed, spawning a that the price of SOL fell by around 50% in just 7 days and found a local bottom at 40 euros.
Additionally, Zala mentioned Solana’s Total Value Locked (TVL) which continued to fall during the third week of May due to bearish market trends that have seen decentralized finance (DeFi) interest decline.
For IOTA, Zala indicated that it has managed to break above the important support level of €0.32. This jump comes after a drop to the €0.22 level, its lowest since January 2021. Indicators remain bearish, with IOTA trading below important MA lines.
With DOT, he explained that it bottomed out at 6.6 euros and broke through the resistance zone again. “It is now testing the €9 level again, which has been acting as a support level since July 2021. AT indicators such as RSI and MACD remain in bearish territory,” Zala noted.
For XRP, Zala highlighted that it touched a long support trend line and is now trying to reverse its downtrend. “The long wicks suggest that the buyers are aggressive at these levels, but the price is still trading well below the important moving averages,” he commented.
“Various indicators show that XRP is oversold, which means that it may be able to push in the direction of an uptrend in the short term. However, to validate that reversal, the price must move towards a formation of higher highs and a formation of higher lows”, explained Zala.
Lastly, Zala emphasized saying that the current selling pressure in the cryptocurrency market shows no signs of abating any time soon, with the price of Bitcoin declining for seven consecutive weeks for the first time in history, he said that this momentum continues to favor investors. bassists.
Disclaimer: This material is intended as a commentary on economic or market conditions and does not constitute financial analysis or recommendation. The analysis presented here corresponds to the Country Manager of Bitpanda in Spain and under no circumstances is an investment recommendation by Cointelegraph. Anyone, before investing, must carry out their own research and is responsible for their own decisions.
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