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First Mover Americas: The Bitcoin Death Cross

Analytics

www.coindesk.com 25 April 2022 15:23, UTC
  
Reading time: ~4 m

Good morning, and welcome to First Mover. Here’s what’s happening this morning:

  • Market Moves: Risk-off drives bitcoin lower. The cryptocurrency's three-day chart shows an impending death cross.
  • Chartist's Corner: ‘Built to Fail?’ Why TerraUSD’s growth is giving finance experts nightmares.

And check out the CoinDesk TV show “First Mover,” hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.

  • Sergey Vasylchuk, founder and CEO, Everstake
  • Maxim Galash, CEO, Coinchange
  • Dan Jeffries, managing director, AI Infrastructure Alliance

Market Moves

By Omkar Godbole

Bitcoin's bear market has plenty of steam left. That's the message from an impending death cross on the lesser-followed three-day chart, where each candle represents 72 hours.

The death cross occurs when the 50-candle simple moving average (SMA) crosses below the 200-candle SMA. Aficionados of technical analysis consider the ominously sounding chart pattern a warning of a more profound price drop.

And while its predictive powers are constantly questioned, given it is based on backward-looking moving averages, its past record on the three-day chart as a doom indicator is perfect.

Latest Headlines

  • Shiba Inu Owners Flock to Burn Portal With 11B Tokens Removed
  • Crypto Becomes Lifeline for Russian Emigrés Opposing Putin’s War in Ukraine
  • Crypto Payments: When the Tech Fades to the Background
  • Drugs, Drugs and More Drugs: Crypto on the Dark Web
  • Why Banks and Payment Processors Shun Perfectly Legal Businesses
  • PayPal’s Blockchain Chief on the Future of Crypto in Payments
  • The History of Cash-Like Digital Payment Instruments
  • GPUs Get Cheaper as Ethereum’s Switch to PoS Gets Closer
  • Morgan Stanley Says Wholesale Banks Can Thrive in a More Regulated Crypto Market
  • Why Do Exchange Balances Matter in Crypto?
  • Bitcoin Hits 6-Week Low as Risk-Off Sentiment Hits Financial Markets
  • Kraken Receives UAE License to Operate as a Regulated Crypto Exchange
  • EU Agrees on Law to Curb Online Ads, Strip Illegal Content

‘Built to Fail’? Why TerraUSD’s Growth Is Giving Finance Experts Nightmares

By David Z Morris

Late on Monday, April 18, the stablecoin terraUSD (UST) edged out Binance’s BUSD to become the third-largest stablecoin by market cap. There are now nearly $18 billion UST in circulation. That’s well below the nearly $50 billion total for Circle’s USDC, or the $82 billion worth of Tether’s USDT roaming the Earth.

But UST is also much different from those competitors, in ways that could make it incredibly risky.

Stablecoins are tokens tracked by a blockchain, but in contrast to assets like bitcoin (BTC), they’re intended to consistently match the buying power of a fiat currency, most often the U.S. dollar. Stablecoins were first created to give active crypto traders a tool for moving quickly between more volatile positions, though as we’ll see, the potential for big interest rates on loans has also helped attract capital.

USDT and USDC are so-called “backed” or collateralized stablecoins. They keep their 1:1 dollar “peg” because they are (ostensibly) backed by bank accounts holding dollars, or by other dollar equivalent assets, for which tokens can be redeemed – although Tether has been notoriously reticent to specify the nature of its reserves.

UST, by contrast, began life as what’s known as an “algorithmic” stablecoin. These could also be referred to as “decentralized” stablecoins because decentralization is their primary reason for existing. A collateralized stablecoin like USDT or USDC is reliant on banks and traditional markets. That makes them in turn subject to regulation, enforcement and ultimately, censorship of transactions. Circle and Tether are run by centralized corporate entities with the ability to blacklist users and even seize their funds. Both systems have done this, sometimes at government behest.

In principle, algorithmic stablecoins like UST don’t have this censorship risk because they are not run by centralized corporate structures and do not hold backing in traditional institutions like banks. Of course, in reality “decentralization” is relative, and most such systems today still have key men, such as Do Kwon at Terraform Labs, or affiliated organizations that provide labor and funding. Whatever a system’s “decentralized” branding, regulators can still go after such public targets, a risk that’s worth keeping in mind.

Read The Full Story Here: ‘Built to Fail’? Why TerraUSD’s Growth Is Giving Finance Experts Nightmares

Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra and Nelson Wang.


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