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Marcus Sotiriou, Analyst at the UK based digital asset broker GlobalBlock
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, hence resulting in prominent protocols going under.
There is extreme fear across the crypto market, as Bitcoin has bounced off $30k – a key, psychological level. In addition to ongoing macro headwinds, there is now a fundamental risk to the crypto industry as the UST stablecoin has de-pegged from $1. This resulted in extreme panic, as investors feared the Luna Foundation Guard selling their reserves including 80,000 Bitcoin. Data from Glassnode shows that 80,000 Bitcoin has been removed to exchanges, showing that LFG have been selling their Bitcoin in order to raise funds to push the price of UST back up.
Also, the forthcoming response over the coming months from regulatory authorities will likely be ruthless. Janey Yellen, the US Treasury Secretary, coincidentally spoke yesterday during a Senate Banking Committee about the potential threat to financial stability posed by unregulated cryptocurrency markets.
Yellen said, “I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework that’s appropriate.”
Furthermore, Todd Phillips, Director of financial regulation and corporate governance at the Centre for American Progress, said “investors in stablecoins deserve the same kinds of protection as they would with money market funds. This is $18 billion in wealth that we’re seeing evaporate before our eyes, and people are losing money.”
Although the future of Luna and UST is bleak with trust being lost, Do Kwon said he a new plan will be revealed soon.
Today’s U.S. 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 they have more work to do. However, if the reading is as expected this could signal that inflation has peaked, hence potentially leading to some short-term upside.
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Image and article originally from www.the-blockchain.com. Read the original article here.