The State of the Alts – 05-12-22

The Global View

Top Left: Bitcoin Dominance – Daily
Top Right: Altcoin Index – Daily
Bottom Left: Midcap Index – Daily
Bottom Right: Shitcoin Index – Daily

Above we can see a snapshot of the entire Crypto market broken down into four very specific charts.  The overall Bitcoin Dominance chart shows you how much of the total market cap belongs to Bitcoin and therefore it also tells you how much of the market belongs to Altcoins.

And this my friends, is why we tagged last weeks article with Market Collapse.  We here at Trading Room very much hope that no one was in LUNA or the associated UST over this last week.  The 100% loss in LUNA as well as the complete depeg of UST shook the entire Crypto Market as well as sending massive shockwaves into the DeFi sector specifically.  As you can see above – Everything got destroyed.  The LUNA Black Swan was enough to force Bitcoin back into the 24Ks.  This was no small thing at all.

Altcoin Index

Description: Each asset in the Altcoin Index is weighted the same.  This gives a good look at a basket of higher profile and higher MCAP coins. 

Starting off as we always do – The Altcoin Index:

ETH: -26%
XRP: -34%
ADA: -35%
LINK: -38%

You get eh idea.  All of these Alts got completely hammered during the LUNA Black Swan.  BTC itself got smashed so far 18% over a rolling 7 day period.

Midcap Index

Description: This is the playground for most traders.  It’s widely excepted that the top tier Crypto have already made most of their explosive moves but that is not the case in the land of the Mids.  The Mids make a wide variety of projects from L1’s like Algorand to ad seeking marketing like BAT.

If there is no love for the Majors – there is no love for the Mids.

ALGO: -35%
XLM: -27%
ATOM: -48%
XMR: -33%

Mids got destroyed.  These numbers are 7-day rolling and they include the mini pimp that a few had during the trading session yesterday.  For example, the peak drop on XLM for the same time period was actually -40%.  Mids were brutalized.  We can even see in the index that the few days leading into the bigger sell off were performing much worse than the Alt Index.

Shitcoin Index

Description: What market in the world can you label a basket of assets and call them SHIT?  Only Crypto baby!  The SHITperp is your view through the window of our beloved Shitcoins.  These represent 50 coins that have relatively low market cap but still have stand out projects.  Coins like MANA, in and of itself is actually a great project with a bright future but its market cap deems it as Shit.  THETA, CHZ, ENJ, HBAR, ZEN, etc.  These projects are actually good projects with good fundamentals, so they skew the balance sheet a bit because these are not exactly the Shitcoins that some other people talk about when they talk about Shitcoins!

Shitcoins got a bit of a headstart as they already broke their long-term support the week prior.  Shitcoins usually amplify price action, both to the upside and the downside.  That is why this basket is so large.  It allows for the self smoothing of data given the lunacy of some of the selections.  

BTT: -36%
THETA: -42%
KNC: -53%
ZRX: -50%

Monster hits across the board.  You buy an Alt and a day later its worth half as much as what you paid for it.  Incredible right?  This market can DUMP twice as hard as it pumps – never forget that.

Weekly Movers

There are a lot of Alts in the market that are finding Support and making their first go at resistance ina  long time.   Some are breaking through while others remain constrained by the overhead resistance in front of them.

All things considered, we can either see a fake out market wide and this move is nothing more than a distraction or a further rally up to local levels somewhere near the 50% of the major drop.

Terra - LUNA - UST

Terra is a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.

LUNA fell on some very unfortunate times as we can see by the two charts below.  Outside of widely accepted theories and accusations, no true evidence has been put out at the moment. What we can say is this:

Someone purposely bought a ton of UST.  That someone then dumped a ton of BTC, causing the price of BTC to drop.  What do the two have in common?  UST was backed in majority by BTC.  UST briefly broke peg and then LUNA was forced to start selling the already discounted BTC in order to try to restore the peg back to fiat US – or $1.  Meanwhile, large shorts on BTC and LUNA were already in motion and the someone who bought 25K BTC worth of UST preceded to dump them all.  This in turn cause panic, the peg was destroyed and LUNAs price swiftly dropped from $100 to $25.  That was just Day 1.  The following days brought LUNA to $0 and the UST peg to 0.05.

This was clearly intentional.  This was targeted directly at UST and by targeting UST, you are targeting LUNA.  This was not a hack, this was not a rug, this was not a honeypot, this was not a scam.  Plain and simple, this was nothing more than exploiting the game and allowing the filthy rich to continue to get even richer.  It’s a shame and it destroys the entire market all so a couple of guys could walk away with at least $800 Million in profits.

LUNA/USDT:

In order to burn UST – the 4.7 Billion or so that it would need to burn, you need to mint LUNA.  Now, we all understand how inflation works, right?  LUNA took their circulation supply from 3.5B to 6.5T.  The math is too much for me to handle at the moment but to put into perspective, it’s like taking all the diamonds in the entire world and magically finding an ocean full of diamonds.  Your original diamonds are no longer rare and valuable anymore.  LUNA dropped so low that major exchanges went ahead and de-listed them. 

UST/USDT:

UST is a nightmare of any investor.  This is supposed to be a “safe” stablecoin.  This is your equivalent to the US Dollar.  When you go to redeem your UST, that should be worth $1 and you find out that they are only willing to give you $0.10 on that dollar, well, we got problems.  We are talking about something like 12B Dollars worth of something was just simply not worth 12B Dollars anymore.  This goes back to the great Depression era when banks would only give our grandparents ten cents for every dollar if they wanted to make a withdrawal.  

The Wrap Up

The Dust needs to Settle.  Do we see a relief bounce from here?  Sure.  That makes sense after all the excitement.  Did people overreact, freak out and panic sell the bottom?  Probably.  The thing is, there is no real way to justify when the best time to try to catch the falling knife actually is.  This is why we wait.  Sure, we have some Weekly levels or some strategies that can help to identify coins that can turn around quickly but by in large, one wants to wait to see whether we get a reversal for one and if that reversal is actually legitimate or is it a fakeout.  

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