Despite the turmoil in the crypto markets in the past month, stablecoin volumes have been rising. The controversial Tether, for example, has been able to maintain a stable price of $1.00, even as bitcoin has lost 30% and ether has dropped by 50 percent. Some traders are worried that the market may be experiencing a “dead cat bounce,” meaning that the prices of stablecoins will fall, just like the dead cat bounces after you drop it.
While it’s hard to believe when looking at the charts, it’s been over a month since dUSD, MakerDAO’s second ever stablecoin product, reached an all time high of $1.02. Since then, the price has fallen to around $0.95. What caused the sudden drop? Well, first of all, it’s important to look at the bigger picture. Lately, a large amount of new money has begun to flow into the stablecoin ecosystem with the bulk of that new money flowing into dUSD. This is great news for MakerDAO and especially MKR holders, since it means that the demand for the stablecoin is increasing. (This is also why the price of a dUSD is higher than
The much-hyped cryptocurrency market is seeing a sharp rebound, with the total capitalization of the industry rising from $104 billion to around $130 billion in a week. While the recent market recovery is a welcome relief from the brutal collapse seen in the first quarter of this year, it’s still possible that the market is seeing a “dead cat bounce”—a brief rise, before crashing completely. The recent surge in the total market capitalization of the industry is being led by the newer crypto assets, with stablecoins like tether and DAI now accounting for more than $20 billion in total market capitalization. For some, this shift to stablecoins is a sign of an industry that is maturing, with investors fleeing assets that have
The recent extreme volatility in the crypto-currency market after bitcoin (BTC) fell to $30,000 and rose again to $38,000 has confused traders as to whether the current price action is a dead cat bounce leading to lower token prices or a definitive reversal paving the way for the next market surge. Although the price of BTC is still more than 40% below its all-time high of $64,863, the bulls have managed to survive several attempts to break well below the $36,000 support level. 4 hour chart BTC/USDT. Source: TradingView A closer look at blockchain and exchange inflow data shows that bitcoin sales have led to a downturn in the overall market. Nick Pappageorge, an analyst at Delphi Digital, noted that BTC inflows to the exchanges exceeded 20,000 BTC in just one hour on Wednesday, the highest level since March 2020. BTC posts in the exchange. Source: Delphi Digital
FUD-o-rama destabilises the market
One of the main sources of market turbulence that Pappageorge identified were the seemingly daily FUD headlines, including a new ban on cryptocurrencies by the Chinese government and fears that Tesla would dump its bitcoin shares. This cry of fear forced traders to dump their coins on the exchanges to prevent a further drop in prices. Pappajorge also pointed to concerns over two Binance blockchain hacks that saw the price of PancakeSwap (CAKE) and Pancake Bunny (BUNNY) collapse, siphoning off $45 million in funds from users of the latter, exacerbating market fears. The change in sentiment this week was fueled in part by positive headlines, such as the formation of a bitcoin mining board after a meeting between Elon Musk, Michael Saylor and North American bitcoin miners, which contributed to a turnaround in BTC and altcoins. This rapid turnaround has sparked a debate about whether current market activity looks like an upturn or a reversal. 70% Nuke -> 80% Bounce -> 10% Dip Dead cat or flip pic.twitter.com/qefB6y4ahQ – Darren Lau (@Darrenlautf) May 25, 2021
Experienced traders accumulate resources at lower prices
While many newcomers to the crypto-currency market have found the recent volatility unbearable, more experienced investors have seized the opportunity to accumulate BTC at a 50% discount, with the number of new accumulation addresses reaching new all-time highs in the turmoil. Number of bitcoin accumulation addresses. Source: Glassnode Noted Twitter user and bitcoin analyst PlanB posted the following chart showing bitcoin’s fluctuations around the stock-to-flow (S2F) model. The recent decline falls within the standard range in which it falls. BTC price fluctuations around the S2F model. Source: PlanB PlanB said: Buying opportunities like today are rare (Q1 2019 when I wrote the S2F article, March 2020 because of Covid, and now). Life is a choice. As for the bullish signs needed for a quick recovery, Ashwath Balakrishnan’s report in the Delphi Daily on the 24th. In May, the supply of stable fiat currencies in circulation increased, from 15 billion to nearly 21 billion in the past 5 days. Stablecoin Circulating Stock. Source: Delphi Digital While this could be a sign that buyers of tokens are replenishing their stocks, Balakrishnan was quick to point out that these could just be stable coin arbitrageurs, and he stressed the importance of ensuring that circulating stock does not fall sharply to confirm that this inflow is being deployed. A record amount of dry powder is now available on the exchanges, but at the same time, a whole new cohort of cryptocurrency investors who just experienced their first 50% drop are wondering whether to exit or double down. The most experienced market participants are betting on a rise in the market, but further volatility is almost guaranteed. The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and every transaction involves risk. So you need to do your own research before making a decision.While the recent dip in crypto prices has caused a number of exchanges to either temporarily or indefinitely halt the listing of new stablecoins, the outlook is not all bleak. Many crypto traders are taking this as an opportunity to accumulate at a discount, and this concern is reflected in the growing numbers of new stablecoin deposits and volume.. Read more about dog bounce and let us know what you think.
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