Market crash takes down ‘SoLunAvax’ trade (AVAX, LUNA and SOL)

The latest moves in crypto markets, in context

Edited by Parikshit Mishra

(Substituting for Omkar Godbole)

January 6, 2022

Sponsored by

If you were forwarded this newsletter and would like to receive it, sign up here.

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

Market Moves: Bitcoin falls below $43,000 and breaches key support level after U.S. Federal Reserve minutes reveal more hawkish-than-expected tilt on inflation – leading to nearly $800 million worth of crypto futures being liquidated.
PLUS: Other top cryptocurrencies, including Polkadot, Solana, tanked on Thursday, driven by broader sell-off.

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. Today's show will feature guests:

George Kaloudis, research associate, CoinDesk
Ridley Plummer, metaverse and NFT project manager, Australian Open
Adam De Cata, blockchain studio and metaverse specialist, Run It Wild

Market Moves

By Shaurya Malwa and Bradley Keoun

Bitcoin broke below the $46,500 support level on Wednesday. (TradingView)

In the last 24 hours, crypto futures worth over $812 million were liquidated as bitcoin broke its $46,000 support level and fell to $43,000, according to data from analytics tool Coinglass.

Adding to the market pressure were indications that the Bitcoin blockchain's hashrate – a gauge of the network's computational security – fell amid protests in Kazakhstan, which brought a nationwide internet blackout. The country had become one of the biggest destinations for crypto-mining operations following last year's exodus from China.

Bitcoin fell to as low as $42,500 in Asian hours on Thursday morning after trading above $47,000 on Wednesday. Traders took on $317 million worth of losses on bitcoin-tracked futures alone, with 87% of those positions betting on upward price movements.

Liquidations occur when an exchange forcefully closes a trader’s leveraged position as a safety mechanism due to a partial or total loss of the trader’s initial margin. This happens primarily in futures trading, which only tracks asset prices, as opposed to spot trading, where traders own the actual assets.

A drop in bitcoin prices led to altcoin markets seeing deep cuts. Over 200,000 positions were liquidated in the past 24 hours, with a bulk of the losses coming during the U.S. hours.

Wednesday’s plunge came shortly after the release of the minutes of the December meeting of the U.S. Federal Reserve (Fed). The agency revealed it would slowly reduce its $8.3 trillion balance sheet in 2022 after announcing a record asset-buying program in 2020 when the coronavirus outbreak initially started, as reported.

Here's what analysts and crypto industry executives are saying about the latest market sell-off:

"We probably would not bet the farm near-term on BTC" – Sean Farrell, digital-asset analyst, FundStrat
"Support levels are cushions, not precise points, so we would make sure breakdowns are confirmed on a consecutive closing basis before acting on them. Secondary support for bitcoin is near $37.4K and for ether near $3,284" - Katie Stockton, founder, Fairlead Strategies
"The 'don't fight the Fed' mantra may already be pressuring the broad crypto market, with companionship from peaking commodities" – Mike McGlone, senior commodity strategist, Bloomberg Intelligence
"The downward pressure on the price is expected to continue until the market fully prices in the tighter-than-expected future monetary policy. Furthermore, from a technical perspective, bitcoin has had a breakdown from the $45K-$52K range, and this could be a signal for another leg down" – Yuya Hasegawa, crypto market analyst, Bitbank.
"For a few weeks now, we’ve been clearly in a downtrend and there are no signs of a decisive reversal in sight. However, striking similarities between the current price action and the market moves between mid-May and August do give reasons for cautious optimism in the medium term. A bounce to around $47K in the next few days could corroborate that thesis while further losses would largely invalidate it" – Mikkel Morch, executive director and risk management, ARK36
"There is currently no sign of a rebound" – Du Jun, co-founder of Huobi Group

Polkadot, Solana Biggest Losers in Sell-Off

By Shaurya Malwa

Plunge (Shutterstock)

Top cryptocurrencies saw deep losses in the past 24 hours, retreating in sync with bitcoin.

Among the top 10 cryptocurrencies by market capitalization, the tokens of Ethereum rivals Avalanche (AVAX), Terra (LUNA), and Solana (SOL) – the so-termed ‘SoLunAvax’ trade – fell as much as 12% in the past 24 hours. Polkadot (DOT), another Ethereum rival, saw its tokens fall by 14% before seeing a slight revival in Asian hours on Thursday.

Tokens of these networks have risen by triple-digit percentages in the past year, mainly as investors looked for blockchain alternatives outside of Ethereum.

DOT found support at the $25 price level, one that has previously acted as resistance, and gained $1.26 at the time of writing. Falling under these prices could mean a drop to just over $20, where the next support exists.

DOT support levels and RSI readings. (TradingView)

SOL fell from the support level of $167 to $144 during Asian hours on Thursday, temporarily reaching prices last seen in October 2021. The $130-$140 range remains crucial for SOL, according to the charts. Falling below that range SOL could drop to $78 if previous resistance levels are considered.

SOL support levels and RSI readings. (TradingView)

LUNA, which surged from $50 at the start of December 2021 to a high of $103 later that month, continued the downtrend it has witnessed since the past two weeks. Prices were at support levels of $75 during Asian hours on Thursday and dropping below the support could trigger a fall to nearly $50.

LUNA support levels and RSI readings. (TradingView)

A Message from Grayscale

When you imagine the future, what do you see?

At Grayscale, we believe the future of finance is represented by the digital economy, and cryptocurrencies are at the forefront of this evolution.

Asthe world’s largest digital currency asset manager, Grayscale is exclusively dedicated to creating products with potential for growth in the digital economy, offering investors an opportunity to gain early exposure to the latest innovations – and the ease of doing so directly through their IRAs and brokerage accounts.

Explore the future with Grayscale - learn more about our family of investment products on our website:

grayscale.com/products

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers:

There are no gainers in CoinDesk 20 today.

Asset	Ticker	Returns	Sector
Internet Computer	ICP	−17.7%	Computing
Polkadot	DOT	−12.3%	Smart Contract Platform
Solana	SOL	−12.2%	Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

A Message from Horizen

Happy Holidays from the Horizen Team! Join our holiday giveaway to win some $Zen

Horizen is the zero-knowlege network of blockchains powered by the largest and most decentralized node system. Its blockchain deployment protocol, Zendoo, is live on mainnet as of Dec 1st 2021!

Zendoo enables developers and businesses to deplot provate and public blockchains with unmet scalability, flexibility, and throughput to support any real-world needs.

CoinDesk Presents New Money, Premiering Jan. 12

New Year, New Money

New Money, a new series by CoinDesk, explores what it means to be part of the new “creator economy.” In the talk show hosted by Spencer Dinwiddie and Solo Ceesay, we hear from pro athletes, celebrities and social media influencers who are on the cutting edge of interacting directly with fans and developing new ways to generate revenue from their own celebrity. Learn more here.

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Risk and Opportunity for Algorithmic Stablecoin, The Case for BlockbusterDAO

"First Mover" hosts speak to Harvard Business School Professor of Business Administration Marco Di Maggio about the risk and opportunity for algorithmic stablecoin. Seth Ginns, CoinFund managing partner and head of Liquid Investments, analyzes crypto markets. Plus, taking a page from ConstitutionDao, will BlockbusterDAO succeed in its mission? Tasafila, founder of BlockbusterDAO, shares insights into the movement.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.