First Mover Americas: Luna Foundation Guard Is Back Buying Bitcoin, Fed Minutes on Deck

The latest moves in crypto markets in context for April 6, 2022.Read MoreFeedzy

Good morning, and welcome to First Mover, our daily newsletter putting the latest moves in crypto markets in context. Sign up here to get it in your inbox each weekday morning.

Here’s what’s happening this morning:

Market Moves: Bitcoin drops as bond yields continue to rise. Technical charts signal more losses ahead. Luna Foundation Guard returned to the bitcoin market with a bang.

Featured Story: Metaverse majors struggle as user base falls short of market expectations.

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.

Damanick Dantes, markets reporter, CoinDesk

Scott Freeman, partner and co-founder, JST Capital

James Czerniawski, senior tech and innovation policy analyst, Americans for ProsperityBilal Hafeez, founder and CEO, Macro Hive

By Omkar Godbole

It’s dip buyers versus adverse macro factors in the crypto market today.

After a brief hiatus, Luna Foundation Guard (LFG), a non-profit organization mandated to build reserves supporting smart contract blockchain Terra’s dollar-pegged stablecoin UST, returned to the bitcoin market with a bang.

The foundation snapped up more than 5,000 BTC worth $230 million early Wednesday. That’s more than business-intelligence software company MicroStrategy’s purchases of 4,167 BTC between Feb. 15 and April 4.

Still, bitcoin traded weak as the relentless uptick in the U.S. government bond yields triggered renewed risk aversion in stock markets. MicroStrategy persistently bought the dip in the final quarter of 2021, but that didn’t stop or slow down cryptocurrency’s the-then bearish trend. Bitcoin nosedived from $68,000 to $32,000 in three months to late February, predominantly on hawkish Fed fears.

The crypto Twitter is optimistic that LFG’s continued purchases to build a $10 billion bitcoin reserve eventually would help the cryptocurrency decouple from traditional markets this time. The belief perhaps stems from LFG buying bitcoin in large quantities compared to MicroStrategy’s past purchases. Only time will tell if LFG saves bitcoin from worsening of macro conditions, if any.

According to some observers, bitcoin’s next leg higher would resume once the real or inflation-adjusted yields stop rising. The U.S. 10-year real yield has risen over 60 basis points in four weeks to hit a two-year high.

The Fed is scheduled to release the minutes of the March policy meeting on April 6. The CME Group FedWatch Tool points to a more-than-70% probability of a 50 basis points (bps) rate hike in May. The central bank raised rates by a quarter percentage point last month.

“Now risk aversion is gradually rising, and the dollar index has reached its year-to-date highest level,” Griffin Ardern, a volatility trader from crypto-asset management company Blofin, said. “The liquidity contraction may be accelerating. At 2 p.m. ET, details of the March FOMC meeting will be announced.”

“In case the minutes show that policymakers considered a bigger rate increase but ended up voting for a 25 bps one to avoid a big market reaction, U.S. Treasury bond yields could continue to rise and provide a boost to the dollar,” FXStreet’s Eren Sengezer noted. “Market participants will also pay close attention to details surrounding the Fed’s plan to shrink the balance sheet.”

Bitcoin’s charts hint at a deeper pullback

Bitcoin’s hourly and daily charts. (TradingView)

The hourly chart (above left) shows the cryptocurrency has dived out of a narrowing price range.

The daily chart relative strength index has breached the ascending trendline and the MACD histogram has crossed into bearish territory under zero.

So, support at $41,780 identified by the 50-day average stands exposed. On the higher side, the 200-day average at $48,266 is the level to beat for the bulls.

By Sam Reynolds

The metaverse, despite all the interest from venture capital and the world’s major brands, is struggling to attract users, and token prices have begun to reflect this. Tokens for the three major metaverse protocols, Decentraland, Axie Infinity and The Sandbox are all down year-to-date, and significantly underperforming bitcoin.

While all three have seen significant interest from venture capitalists, who have allocated hundreds of millions to metaverse and GameFi, some market observers say the number of daily active users (DAU) doesn’t reflect the level of investment.

“There is currently no organic engagement that retains players in the game – unlike traditional games like Fortnite, GTA, Candy Crush – where players are willing to pay to keep playing,” Web 3 analyst DeFi Vader wrote in an August 2021 note about Axie Infinity. “If one or a few of those games create organic engagement, then DAU growth may stop being mostly dependent on daily earnings.”

Today’s newsletter was edited by Omkar Godbole and produced by Parikshit Mishra and Stephen Alpher.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

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