Marcus Sotiriou, analyst at the UK-based digital asset broker Global block
The impact of this event on the wider market is very significant. Soon we will find out which DeFi projects had their treasuries in anchor or UST, thus leading to the establishment of important protocols.
There are extreme fear in the crypto marketlike bitcoin has rebounded from $30,000 – a key, psychological level. In addition to the ongoing macro headwinds, there is now a fundamental risk for the crypto industry, as the stablecoin UST has deindexed from $1. This led to extreme panic as investors feared that the Luna Foundation Guard would sell off their reserves, including 80,000 Bitcoin. Data from Glassnode shows that 80,000 Bitcoins were withdrawn from exchanges, showing that LFG sold its Bitcoin in order to raise funds to drive the price of UST back up.
Moreover, the response to come over the next few months from regulators is likely to be ruthless. Janey Yellen, the United States Treasury Secretary, coincidentally spoke to a Senate Banking Committee yesterday about the potential threat to financial stability posed by unregulated cryptocurrency markets.
Yellen said: “I think it just illustrates that this is a rapidly growing product and there are risks to financial stability and we need a proper framework.”
Additionally, Todd Phillips, director of financial regulation and corporate governance at the Center for American Progress, said that “investors in stablecoins deserve the same kind of protection they would with money market funds. . That’s $18 billion in wealth that we see evaporate before our eyes, and people are losing money.
Although the future of Luna and the UST is bleak with the loss of trust, Do Kwon said a new plan will be revealed soon.
Today’s US CPI data will be very important for the market going forward over the next few months – a higher than expected reading will signal to the Federal Reserve that it still has some work to do. However, if the reading is in line with expectations, it could signal that inflation has peaked, which could lead to a rise in the near term.