We have a long way to go in the Bitcoin bear market. An imminent death cross on the less-frequented three-day chart, when each candle symbolizes 72 hours, sends this warning.
When the 50-candle SMA crosses below the 200-candle SMA, it is known as a death cross. According to technical analysts, the ominous-sounding chart pattern is a harbinger of a more significant price decrease.
Even while its ability to forecast the future is sometimes questioned due to its reliance on backward-looking moving averages, its track record as a doom signal on the three-day chart is impeccable.
In the weeks after the confirmation of the death cross on the three-day chart in mid-November 2018, Bitcoin’s stalled bear market continued with values plunging by more than 40%. After the mid-December 2014 death cross, a similar pattern of price movement emerged.
At both times, bitcoin (BTC) bottomed out a month later than expected. To put it another way, the subsequent cross sell-off signaled the end of the bear market’s downward trajectory.
So, if history serves as a guide, bitcoin may have to take another hammering before things improve.
Risk-off
On Monday, the price of bitcoin fell to $38,300 as a fresh epidemic of the coronavirus in China threatened to aggravate the already dire condition of high inflation and poor growth confronting the world economy as a whole. Following suit, the price of Ethereum (ETH) fell to a low of $2,800 at one time, its lowest level since mid-March.
Optimism for price turmoil in Bitcoin soared due to aggressive options purchasing.
The implied volatility appeared inexpensive as compared to its previous norms and lifetime average, so this was not a surprise. Mean-reverting implied volatility is seen. Because of this, knowledgeable investors purchase options when implied volatility is low and sell them when it is high.
TerraUSD (UST) overtook Binance’s BUSD late on Monday, April 18, to become the third-largest stablecoin by market capitalization. Nearly $18 billion in UST are now in circulation. That’s much less than Circle’s USDC total of approximately $50 billion, or Tether’s USDT total of $82 billion.
There are certain key differences between the two that might make UST a dangerous proposition.
Why TerraUSD’s Growth Scares Finance Experts
In contrast to assets like Bitcoin (BTC), Stablecoins are tokens monitored by a blockchain, but they are designed to maintain the purchasing power of a fiat currency, most often the US dollar. However, as we’ll see, the possibility of high interest rates on loans has also helped attract money, which is why stablecoins were originally established to provide active crypto traders a tool for easily shifting between more volatile positions.
So-called backed or collateralized stablecoins, USDT and USDC fall under this category. Despite Tether’s legendary reticence to clarify the source of its reserves, they maintain a 1:1 dollar “peg.” This is due to the fact that they are (ostensibly) backed by bank accounts holding dollars or other dollar comparable assets, which tokens may be redeemed for.
UST, on the other hand, started life as an “algorithmic” stablecoin, which is a kind of stablecoin. Stablecoins with a focus on decentralization is often referred to as “decentralized” coins. For a collateralized stablecoin, such as USDT or USDC, banks, and established markets are essential. As a result, their transactions are vulnerable to regulation, enforcement, and, in the long run, censorship. Companies like Circle and Tether, who have the power to ban users and confiscate their cash, are in charge of the two decentralized exchanges. In certain cases, the government has requested this from both systems.
Algorithmic stablecoins like UST, in theory, do not face this censorship issue since they are not governed by centralized corporate structures and do not rely on conventional institutions like banks for their support. “Decentralization” is a relative term; most systems today still have important persons, such as Do Kwon at Terraform Labs, or connected companies that supply labor and financing for the system. There is a possibility of authorities going after such public goals, regardless of the system’s “decentralized” branding.
