Market Trend 16/5 - 22/5 ｜Terra controversy continues, BTC tightens 30k resistance, alts fluctuate

During the last Market Trend we mentioned that this week would be one of absolute caution as investors, both retail and high-level, would wait for a more steady trend in either direction of volatility in order to plan their moves.

As it shows, the market continues to hold on to any clear sign of downside or upside for the crypto ecosystem. It seems to be rather balanced in both directions at the moment; while there are some clear FUD indications to push the crypto market further down, such as the continuous Terra LUNA/UST controversy, news like US inflation allegedly slowing down and institutional crypto adoption gaining steam once again helps to keep the markets at bay.

In this upcoming week, as BTC and ETH hold on to their positions and the global crypto market cap remains stable, the procedure is the same; to not make any drastic decisions in either direction and hold on to more clear indications of where the trend might flow. Although the previous week has been slow, except for some particular alts, we are still in a period of immense caution - with Crypto’s Fear & Greed index beating its 4-year record of Extreme Fear just a couple of weeks ago.


The Terra Controversy Continues
A core driver of market downside and volatility over the past couple of weeks, news continue to flow on Terra’s absolute crash of its LUNA and algorithmic stablecoin UST. Terra’s founder Do Kwon was recently summoned to the South Korean parliament to testify about the debacle; simultaneously, Terraform Labs’ legal team quit the company.

As hope begins to diminish as to whether the situation will be resolved or not, criticism piles up. Rumors that Do Kwon knew about the upcoming de-pegging failure begin to spread online, with documents allegedly showing that he dissolved Terraform Labs mere days before the crash and has since left South Korea. There are also rumors coming even from big crypto leaders that the whole fiasco came from a well-crafted plot from major institutions to profit off of the crash.

What is true and what is false here? Hard to tell, but Do Kwon will have to take a stance and follow up with the legal requirements from the South Korean government, which is also suing him for an amount of nearly $78 million dollars for fraud. The LUNA crypto itself, however, is all but dead, continuing to trade at high 24-hour volumes as investors attempt to profit off of its immense volatility. Under the same scenario as last week, developments from the Terra controversy will be absolutely essential in determining where market sentiment will head to next.



BTC tightens 30k resistance, ETH hangs on to its 2k
This certainly was not a week of large moves, as the market continues to hold on to any clear indications on where the overall sentiment is heading. The 30k resistance point for BTC has been further solidified over the past seven days, and the same goes for ETH’s 2k spot. While some newsflow has been positive, such as inflation being tamed in the US and Facebook’s META filing for “Meta Pay” digital currency patents, the fear is still very much present in the global market.

The total crypto market cap opened the week at 1.35 trillion dollars and closed at 1.31 trillion, with bleeds mostly coming from mid and low-cap altcoins who always take the most damage as investors move into more secure positions during periods of great uncertainty. By analysing the weekly charts for Bitcoin and Ethereum, it’s clear that the cryptos are respectively avoiding the 27k and 1.7k positions at all costs.

It’s certainly not a moment to look for breakout points in the 30/2k range as sentiment is still grossly negative - but these downturns towards 27k/1.7k could symbolize a downside.



Alts fluctuate
Meanwhile, volatility in the top 100 altcoins is only getting higher - a mixture of outflows into the safest BTC and ETH, those looking to grow their bags into their favorite projects who have taken the biggest hits over the past few months and LUNA/UST’s hole left on the DeFi ecosystem. We’ve had projects like Decentraland and THORChain opening the week at highs only to face a market downturn in the last few days of the week.

There’s not really a clear indication of where altcoins are looking to go next, whether it's DeFi, Metaverse or NFTs. If the entire crypto market is being influenced by Terra’s market crash, then altcoins are even more affected by the situation. All in all, it is still a period of immense caution where the safest moves are the more attractive for current investors. Keeping an eye on Bitcoin and Ethereum volumes, as well as global news and crypto exchange inflows/outflows will be essential for the next few days - although it won't be surprising if we find ourselves in this exact same scenario next week.



Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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